Credit crisis worsening for SMEs, claim 95% of poll respondents

A SURVEY of accountancy firms has returned an overwhelming verdict that the banks are not open for business and that the credit crisis for SMEs is worsening.

More than 87% of respondents to an industry survey, conducted by the Institute of Certified Public Accountants in Ireland (CPA), said that they currently believe the banks aren’t interested in lending; while more than 95% said they believe that SMEs have no access to affordable credit. Two-thirds of all respondents said they had noted a rise in the level of loan facilities being reduced or removed by the banks.

Nearly 60% of accountancy firms has seen evidence of viable businesses encountering trading difficulties due to a lack of bank credit.

According to CPA head, Eamonn Siggins: “Our members have highlighted serious ongoing concerns for Irish businesses. The situation regarding bank credit has actually worsened over the past year, despite the efforts of the Government and the existence of the Credit Review Office.”

“This is threatening the viability of businesses throughout the country and is undermining prospects of economic recovery. It’s generally accepted that the SME sector will be the main engine of economic and employment growth in the coming years, but credit is the oil that will keep that engine running. Urgent action is needed to get credit flowing again if the already fragile recovery is not to stall,” he added.

“It’s clear that Government intervention is needed in this area. Our members aren’t calling for loans or support for businesses which aren’t viable. However, what we are seeing is good businesses being undermined by cash flow,” according to Mr Siggins.

Cash flow and the re-emergence of the ‘black economy’ are the other main issues.

Opinion was divided equally on the outlook for business over the next 12 months, but most respondents agreed that the temporary reduction in the VAT rate should provide a positive stimulus for business and the wider economy.