SFA director Patricia Callan is also calling for a state-backed loan guarantee scheme, and for the advocacy remit of the Money Advice and Budgeting Service (MABS) to be extended to allow it negotiate with banks on behalf of small firms.
Ms Callan was speaking in response to the fifth report from the Credit Review Office (CRO), which indicates that Ireland’s pillar banks are unlikely to meet their €3 billion additional lending requirements this year.
Ms Callan said: “It is unacceptable at a time when access to finance is the single biggest issue for the small business community that the banks claim that the reason they can’t lend is because there is no demand.
“There is a clear difference between what our members are telling us and what the banks are saying. The Central Bank will track the supply side and look at the banks’ figures, but we clearly also need reporting on the demand side to assess companies’ credit needs.”
Ms Callan said business owners are finding their overdraft facilities are being cut without notification, long-standing banking relations are being put aside and they are having to “start from scratch” when dealing with new bank staff.
“A broad-based government-backed loan guarantee scheme, as operates successfully in many other developed countries, needs to be introduced as a matter of urgency. The scheme announced as part of the jobs initiative is too restrictive and will not go very far in protecting or creating jobs,” she said.
“Such underwriting of credit will allow businesses to recapitalise themselves where the lending would be outside the prudential lending policies of the banks and the Central Bank.”
In relation to the recommendation of upskilling of management capabilities, the SFA says MABS should be expanded to help small business owners resolve issues such as advice on dealing with legal, accounting and finance for business restructuring, and negotiating with creditors and banks.
The SFA is on the steering group of a Department of Finance initiative to formalise demand-side surveys on access to credit on a half-yearly basis, which, with the improved quarterly assessments by the Central Bank of the supply side, should give a more realistic picture of the gaps in SME financing.
Ms Callan said: “Restoring trust and confidence is absolutely essential to business investment and thus growth in jobs. This regular report is an essential component in this process.”