Credit application refusals dwindling

Banks are turning away fewer small and medium-sized businesses in search of credit than earlier in the year, according to a new report.

The latest Isme Quarterly Bank Watch survey, released today by the Irish Small and Medium Enterprises Association, shows a continued reduction in the number of loan refusals to SMEs; down from 42% to 38%.

The length of time taken to reach a decision on extending funds to businesses has increased in the three months to the end of November, however.

Commenting on the results of the survey, Isme chief executive, Mark Fielding highlighted the extended decision time as a concern and called on banks to process requests at a quicker pace.

“As we slowly exit the recession, there are tentative signs that the banks are releasing more funds into the SME sector as business shows increased turnover and profitability projections.

“The still fragile balance sheets, which reflect the losses in 2008 to 2013, are being factored in in increased interest but the increased lending is to be welcomed.

“The number of applications that are pending continues to increase, which is a concern,” he said.

“Banks must become more efficient in dealing with credit requests. It is not acceptable that the bailed-out banks delay economic recovery through their unproductive and slow work rates.

“The association is demanding that the Central Bank investigate this common thread as all three main banks individually have increased the pending applications which could temporarily disguise a reluctance to issue a refusal,” said Mr Fielding.

The Isme report also warns of the risks facing SMEs whose loans are “caught up” in banks that are either deserting the country or have gone out of business in the past number of years, and called on the Government to provide a guarantee scheme for such businesses.

The recently-unveiled Strategic Banking Corporation of Ireland (SBCI) — which is expected to start advancing loans from its initial €800m tranche of funding in the new year — is also attracting significant interest from small and medium-sized businesses although a substantial number of firms reported that they needed more information on the fund.

While 42% of respondents stated that they would approach the SBCI for funding within the next year, a similar number flagged their uncertainty over details of its operation.

Separately, AIB announced that lending approvals to SMEs had reached €5bn to the end of October — a rise of some 60% on 2013 levels.

The bank is seeing increased demand for credit across a range of sectors including agriculture, transport and retail, as well as hospitality.