‘Lack of quality in sector and too few lending banks curtailing SME growth’

A lack of quality among Ireland’s small business community and a paucity of lending banks in the marketplace are curtailing SME growth, an ESRI-hosted conference heard yesterday.

While the ‘SME Financing’ conference heard results of new ESRI research — most notably that difficulty in accessing finance is only third on the list of priorities for small firms, behind falling demand and increased competition — delegates and speakers raised a number of other issues.

Delegates were told that while policy solutions for investment finance are a popular topic of discussion, more needs to be done regarding working capital finance.

John Trethowan of the Credit Review Office said that while the banks are lending, there are too few doing so.

He said a huge amount of refinancing will be needed by businesses “in the not too distant future”, but that the current number of banks won’t be enough to meet those needs.

Mr Trethowan also suggested that the risk appetite among banks is “too low”.

Delegates also questioned the business management acumen of SMEs, with AIB’s John Irwin saying that “broader business skills, in general, are quite low”, and noting a surprising amount of small firms lacked any kind of business plan.

Both Mr Irwin, and Avine McNally of the Small Firms Association called for a national mentoring programme for SME managers and upskilling — particularly in the case of micro-businesses.

Ms McNally said late payments continue to put major pressure on SMEs, while Mr Irwin said the bottom of the SME lending cycle had been reached and that his bank’s credit pipeline is looking better than for a number of years.

“Banks make money from lending and if we can’t lend to SMEs, we have a problem,” he said.