Credit troubles hamper 75% of firms

A LACK of competition is leading to higher bank charges, according to the country’s small businesses, which also say they are finding it very difficult to get credit.

More than 75% of firms surveyed said banks are still making it more difficult to access finance while almost 50% were refused changes in their bank facilities in the first three months of the year. This is up from a third at the end of last year.

The latest ISME quarterly bank watch survey also found that firms said banks are reducing overdraft facilities, which is creating cash-flow problems.

But the Irish Banking Federation (IBF) said it “totally rejects” ISME’s position on SME lending, saying it is based on “spurious research and is highly misleading”. The IBF said it strongly encourages businesses seeking credit to apply to their lender with a fully supported application.

ISME said that “backsliding, arrogant and downright disobedient banks” must be met head-on by new Government. It has called for the immediate introduction of the state investment bank.

ISME called the figures “alarming” and said they show the issue of bank credit remains a serious problem, with “little or no improvement in the last two years”.

A quarter of respondents had requested a change in their banking facilities, similar to the previous quarter but significantly down on the corresponding period last year. Also 79% of firms said that banks are making it more difficult for them to access finance, compared with 68% in the previous quarter.

The survey also found that just 46% of small business owners are aware of the Credit Review Office (CRO), while 44% are aware of their bank’s appeals procedures.

ISME chief executive Mark Fielding said: “The CRO, introduced by the previous administration as an appeal mechanism, is not working, as evidenced by the paltry number of cases referred, during a time when small business is struggling.

“It is naive in the extreme to think that an appeals process which is not totally independent of the banks can be effective. Owner managers just see it as another layer of bureaucracy within the clutches of the already discredited bank system, headed, staffed and funded by bankers.”

ISME also said almost one in four companies that had a change in their facilities in the last three months, were asked by their banks to reduce their overdraft levels.

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