Coalition failing SMEs on credit

Over 70% of small business owners feel the Government is having little or no impact on improving credit flow to SMEs, despite the last quarter showing a marginal decline in loan refusal levels.

The latest quarterly bank lending survey from small firms lobby group, Isme shows that demand among SMEs for lending edged up from 36% to 37% in the past three months, with an improvement also evident in approval rates.

According to the new survey, 50% of small firms applying for funding (a mix of term loans, overdrafts and alterations to existing facilities) during the last three months were refused credit by their banks. Although still high, it marks an 8% drop on the preceding quarter.

But 71% of firms said they feel the Government is either having a negative effect, or no impact at all, on the SME lending question, with nearly 80% of respondents wanting to see an alternative Strategic Investment Bank established, even though SME lending will be a focus for the planned Ireland Strategic Investment Fund.

“As the troika depart and evidence of tentative economic progress is appearing, the reasonable expectation is that the country will start to gain momentum,” ISME chief, Mark Fielding said.

“However, without reasonable and fair access to credit, SMEs will not be able to fulfil their role of driving growth. The results of this survey demonstrate, quite categorically, that the banking system for SMEs is still not working, despite the deceptive and misleading advertising by the bailed-out banks.”

Mr Fielding said while the restoration of the Irish banking system is critical, it can’t be done at the expense of the SME sector.

On the back of its latest quarterly lending update, Isme has called for improved management in the banks to oversee lending policy and a wider investigation of alternative sources of finance for SMEs. It is also demanding a more “honest and reliable” loan-reporting culture from the banks.

“The two so-called pillar banks are required by the State to sanction €4bn in lending to SMEs this year, but less than one-third of the sanctions are for new lending. Lengthy decision times are a further impediment to SMEs and often amount to a constructive refusal,” according to Mr Fielding.