Just 34% of SME loans are ‘new’

Bank of Ireland and AIB remain on track to achieve their €4bn SME loan approval targets for 2013, but of the amount sanctioned to date only 34% qualifies as new lending, the Credit Review Office has stated.

In its 12th progress report, published yesterday, the CRO — which was established three and a half years ago to monitor the flow of bank credit to small firms — said the pillar banks continue to lend to low-to-medium risk credit applications. However, CRO head, John Trethowan, said that credit conditions remain tight and appeal requests are rising.

Since its establishment, the CRO has found in favour of 55% of appeals made by firms who feel they were unfairly refused credit by the banks. This, it said, has resulted in €18.5m of credit being made available to SMEs and farms, helping to protect and/or create 1,521 jobs in the process.

Of the new lending levels, reported this year, around 22% have been farm-related. In 2012, 20% of new lending was farm-related.

Mr Trethowan added that, apart from the issue of credit availability, some SMEs are finding disappointing customer service levels at the banks, despite extra staff training and policy changes having been made. He suggested that this could be an added area for the Central Bank to focus on in its review of its code of practice on SME lending.

While welcoming the news that the pillar banks are open for business, Small Firms’ Association acting director, Avine McNally, said: “We now need to see them lending to more challenging, but viable, businesses to ensure they can access the credit they require for working capital and investment.

“While lending solutions must be found to allow SMEs deal with their legacy debt, we must ensure that in this process viable business are supported to ensure survival,” she added.

Chambers Ireland, meanwhile, welcomed the news that there is an increased awareness amongst SMEs of the CRO’s role, adding that Government must show strong action to encourage and facilitate further economic growth.

Chambers chief Ian Talbot said the budget should include initiatives to improve the flow of working capital for businesses. He also called for the CRO’s remit to be expanded beyond just the two pillar banks.

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