Credit still ‘key’ for SME survival

Irish SMEs are growing strongly in terms of sales but, worryingly, only a third have reported an increase in profitability as a result.

The survey carried out by Bibby Financial Services Ireland found that out of 350 SME owners, 37% reported stronger trading conditions in the first quarter of 2014, compared with the previous quarter.

Nearly half of the companies who had seen their business improve were focused on the export market with only 35% of those who had seen an increase in the first quarter of the year concentrating solely on the domestic market.

Irish companies remain confident, with 61% of Irish SMEs expecting sales to grow further this quarter, but exporting companies remain significantly more confident.

Managing director with Bibby Financial Services Ireland Ronan Horgan said that the results were “encouraging”.

“Given the potential of the SME sector to create and maintain jobs in Ireland, it’s encouraging to see tangible evidence of increased trade for the sector, particularly in export markets.

“Economic recovery in the UK and US markets means that Irish businesses have increased opportunity to sell abroad which, looking at the results, is happening.”

While sentiment was positive, only 30% of SMEs reported improved profitability which is seen as a worrying indicator.

“However, the lack of profitability is a cause for concern. Many Irish SMEs are suffering unnecessarily as a result of limited access to finance, bad debts and credit management issues all impacting profitability. Access to credit continues to act as a barrier to growth and job creation for SMEs,” said Mr Hunt.

As SMEs are the key drivers of job creation in Ireland providing jobs for 70% of all employees in the country. Mr Hunt said that credit will help these companies create more employment.

“Credit is key and while there continues to be a focus on the area from our policy makers and industry on how to improve access, the SME sector itself need to do more.

“High street banks are likely to be constrained in the amounts they can lend for the foreseeable future, so the onus is on the SME sector itself to think outside the bank and pursue alternative sources of funding which are available to support them,” he said.