‘Stop delays in SME credit’

The pillar banks are failing in their duty to promote funds being made available via the State’s new SME bank as an alternative source of credit to small firms, lobby group Isme has claimed.

The representative body has urged a monitoring of the two main banks and for them to be instructed to promote funds available via the Strategic Banking Corporation of Ireland.

The SME bank has €800m available for lending to small businesses, via Bank of Ireland and AIB, with Finance Minister Michael Noonan recently claiming that figure will increase.

However, in its latest lending trends survey, published this morning, Isme has claimed overlooking the corporation’s funds has resulted in lengthening delays in accessing credit for growth-focused SMEs.

It said the average waiting period from credit request to drawdown of funds is now at eight weeks, while banks’ refusal rates have increased in the past quarter to 33% of loan applications.

“Businesses cannot be kept on the long finger by banks who do not have sufficient lending expertise available to manage the increase in demand from SMEs.

“There is always some barrier placed by banks; initially they lied about quantity of funds available, when their refusal rate was 58%. The Strategic Banking Corporation of Ireland is now offering long-term, low- interest EU funds and they now delay decisionmaking.

“This must stop or these rescued banks will stall recovery in the SME sector, where jobs are vital,” said Isme chief executive Mark Fielding.

He added: “Businesses looking to expand, buy new equipment or hire new staff are usually working on a very time-sensitive basis. They cannot afford to have the banks slowing down their plans and making it impossible to avail of potential opportunities.”

Isme also said that a lack of adequate training in banks, regarding SME lending capabilities, is “a cause for concern” and wants a Central Bank investigation into the matter.

Economic think-tank, the Nevin Economic Research Institute recently called for an overhaul of the corporation into a competitive lender, rather than a funding mechanism for the existing banks. The institute said SMEs need to see more of a physical and local presence from their lenders.