Year-on-year lending to SMEs down by €1.6bn in the first quarter

Lending to SMEs fell by nearly 6% — or €1.6bn — year-on-year, during the first quarter of this year, according to data published yesterday by the Central Bank.

The bank’s latest quarterly ‘Trends in Business Credit and Deposits’ survey also shows a 1.6% fall in the amount of credit issued to Irish SMEs, by the main banks, during the period, compared to the last quarter of 2012.

In all, lending to non-financial, non-property related SMEs fell by €417m during the first quarter of 2013, compared to the preceding three-month period. Year-on-year, the fall in lending was €1.6bn, bringing the outstanding amount of credit advanced to SMEs, in these sectors, to €25.7bn as of the end of March.

This follows an annual decline of 5% for 2012.

According to the Central Bank, gross, new lending to SMEs — which refers to drawn-down amounts of new credit — was €464m during the first quarter of the year.

Deposits held by private-sector companies, meanwhile, rose by 15.6% quarterly, or by €12.4bn, and by 0.9% (€737m) annually, in the three months to the end of March.

The figures come just days after a survey from small firms lobby group, ISME, which showed demand for lending, among Irish SMEs, to be at a four-year high; with loan refusal rates at their lowest for nearly two years.

However, the same study claimed that only 5% of SMEs are satisfied with the Government’s efforts to solve the SME lending issue.

ISME has also called for the establishment of a strategic investment bank, working commercially, that would increase lending levels to small firms and deliver a return on investment to the State.

Elsewhere, this week, the Credit Review Office said an upping in value — from €500,000 to €3m — of the maximum amount of refused credit that SMEs can appeal would help alleviate some of the pressure on corporate borrowers.