Almost half of SME loan applications refused

Almost half of loan applications from small and medium-sized business were rejected in the past three months, according to new figures.

The Irish Small and Medium Enterprises Association (ISME) yesterday released its latest quarterly bank watch survey which tracks the rate of bank credit refusals which saw a significant increase over the summer period.

Some 45% of applications for credit were refused by lenders in the quarter to the end of August - up from 33% in the previous three months.

The uptick bucks a trend of declining refusals over the past number of years, according to ISME chief executive, Mark Fielding.

“After a slow but steady improvement in credit availability over the last two years, it is hoped that these results are just a blip and that the flows of funds into the SME sector will continue,” Mr Fielding said.

“It is difficult to discern a reason for this slow-down as the Strategic Banking Corporation of Ireland (SBCI) has been active in the market since March and demand for bank credit is steady.”

The government-backed SBCI launched in March is aimed at providing cheap credit to SMEs through the two so-called pillar banks, AIB and Bank of Ireland.

As of the end of July, more than 1,600 businesses had drawn down a combined €45m from the SBCI which also includes significant investment from German promotional bank, KfW and the European Investment Bank.

Mr Fielding, however, called on the government to be vigilant in ensuring that the funds are effectively distributed to SMEs, adding that the Central Bank should provide additional training to the banks’ staff members to improve the flow of credit from the fund.