Businesses in the North less confident about getting bank loans

Confidence in their ability to access lending from banks has plunged by almost 50% among the North’s small and medium sized businesses, it was revealed today.

In just 12 months confidence that their own bank would extend them credit has fallen from 100% to 55% according to new research conducted on behalf of a division of London-based merchant banking group Close Brothers.

Harry Parkinson, managing director of Close Invoice Finance in Ireland, said: “The relationship between banks and SMEs has collapsed with severe repercussions for the sector as a whole, and as the recession takes hold the banking industry will surely continue with its strict policy on lending criteria.”

Mr Parkinson added: “The irony, however, and we are seeing this particularly in Northern Ireland, is that SMEs are still relying on bank overdrafts as their primary sources of funding.

“Businesses here need to know that there are other viable, more flexible sources of funding available which will ensure they have a steady flow of cash and see them through these difficult economic times.

“Invoice finance can represent a lifeline to companies that have seen other forms of trade finance dry up.”.

The central premise of invoice finance is that it allows companies to raise cash quickly and easily against their sales ledger, giving businesses a greater degree of flexibility and control over their cash flow.

Despite the deterioration of the credit profile of many businesses, the fundamentals of invoice discounting hasn’t changed, he said.

Mr Parkinson said: “Close Invoice Finance is interested in the integrity of debt, not the company balance sheet or rate of growth, and therefore approaches businesses in a very different way to traditional lenders who are focused on more obvious indicators of business success.”