SME loan arrears hit double digit percentage levels

New data from the Central Bank shows that the amount of business loans not being repaid across key sectors of the economy — such as the construction, real estate, hospitality, and manufacturing — had reached double-digit percentage levels by the end of 2010.

Freshly published back-dated data on SME loan default research, released yesterday, showed that, as of the end of Dec 2010, 18% of the loan volume to small companies in the construction and building sector was in default. The average percentage for loan defaults across the property, hotels and restaurants, and manufacturing industries was between 10% and 15%.

“On average, SMEs with a larger loan, SMEs where management have less experience at the firm, SMEs with higher leverage, lower liquidity, lower current assets, lower trade debtors and lower profitability are more likely to default,” said the Central Bank.