Reduction in number of firms approaching banks for credit

Results of a new survey show that there has been a reduction in the number of business approaching their banks for credit.

However while the numbers are down, there has been an improvement the success rate in accessing credit from the banks, according to the Quarterly Bank Watch Survey from ISME, the Irish Small & Medium Enterprises association.

“The fact that there has been a reduction in firms approaching their banks means that there still remains a large number of companies that are reticent to approach their banks because of fear of refusal, resulting in postponement of investment, missed business opportunities and potential company closures,” ISME said.

The survey of 724 enterprises showed that 33% of companies who applied for funding in the last three months were refused credit by their banks, compared to 42% in the previous quarter.

Some 68% of firms outlined that the banks are making it more difficult for SMEs to access finance. This is an improvement on 83% in the September survey.

“For those ‘lucky enough’ to get facilities, the cost has risen appreciably together with an increase in collateral pledged to the banks,” ISME said.

“The increased costs are inevitable from now on, as competition in the sector reduces, banks pay more for credit and they endeavour to recoup lost profits.”

ISME Chief Executive Mark Fielding called on the Government to create a ‘Third Bank Force’ to compete with the duopoly of AIB and BoI by combining EBS, INBS, Irish Life & Permanent and what remains of BoSI, using their business lending expertise and branch network to set up a specific bank for business lending.

“This ‘Third Force Bank’, with its critical mass, would provide more effective competition to the two and a half major banks and source relevant inexpensive micro finance,” Mr Fielding said.