Fewer businesses seeking credit

FEWER than half of businesses that approach banks seeking finance end up making a loan application, an Irish Examiner/Cork Chamber survey reveals.

And just over a third of those businesses which make formal applications for finance actually get a loan, the survey reveals.

The survey of 100 Cork companies, conducted by Cork Chamber on Thursday and Friday, also found that three out of five companies currently need finance.

The survey found that 76% of respondents have made contact with their bank seeking access to credit. However, only 54% of these made a formal application for credit, and of these only 35% were successful.

The absence of finance is having a serious impact on businesses, with many saying that failing to get credit had a serious (41%) or very serious (30%) impact on their businesses.

However, just 3% of those who failed contacted the Credit Review Office.

The majority of companies need bank finance to provide working capital (58%) for their businesses, while cash for new product development was required by 10%, a further 10% needed funds for investment in plant and machinery and 9% needed support to invest in their premises.

Cork Chamber chief executive Conor Healy said there is a huge demand for credit which is not being met.

“It is clear that a large number of business feel that there is no point going ahead with a formal loan application after making initial enquiries with their bank and this needs to be addressed,” he said.

He said he would be surprised if the figures for Cork differed in other parts of the country.

“The worry is that the majority of companies that can’t get bank finance will abandon expansion plans, scale back, cut jobs and in some cases, unfortunately, go out of business.

Last week Credit Review Office’s credit reviewer John Trethowan published his office’s fifth quarterly report and found AIB and Bank of Ireland would not meet their individual targets of providing €3 billion of credit to small businesses this year.

Mr Trethowan blamed a slowdown in demand for loans and suggested most firms were focused on repaying their debts rather than securing new ones.