Business chiefs have today clashed with a Government group tasked with ensuring lenders free up credit, branding it a mouthpiece for the banks.
The Irish Small and Medium Enterprises Association (ISME) dismissed claims by the Credit Review Office (CRO) of a fall-off in demand for loans from companies.
ISME chief Mark Fielding branded the assessment arrant nonsense and repeated his assertion that finance houses were refusing credit to the majority of small businesses.
Mr Fielding said: “We in the SME sector are sick and tired of the excuses constantly being issued by the CRO, rapidly becoming the main mouthpiece of the banks, justifying the refusal of the banks to provide adequate lending facilities to their SME customers.
“The reality is, and has been for a considerable period, that the banks are refusing lending facilities to the majority of SMEs and in turn are failing to meet the lending targets set down by Government.”
Credit reviewer John Trethowan rejected 27 applications for review and upheld 30.
His fifth quarterly report found it would be a challenge for Allied Irish Banks and Bank of Ireland to meet the target of providing 3 billion euro of credit to small businesses this year.
Mr Trethowan blamed a slowdown in demand for loans and suggested most firms were focused on repaying their debts rather than securing new ones.
“The two banks we deal with have given us a report on the roadshows they’ve done around Ireland with SMEs and farms, to bring them into branches and business centres to tell people they’re open for business.
“That would indicate to us that it’s a demand issue rather than a supply issue.”
Mr Trethowan said a Government survey, due to be carried out by the Department of Finance, was needed to determine the level of demand.
The department said the Government will continue to put pressure on banks to meet their lending targets, but claimed it will not force businesses to take credit it neither needs nor wants.
“We have already learnt the dreadful cost of a credit bubble,” a spokesman said.
But ISME said it was highly irresponsible for the banks to claim firms were not looking for credit.
“This is completely contrary to the views regularly being expressed to ISME from member companies,” Mr Fielding said.
“Access to credit remains one of the most significant barriers for business and the lack of credit is directly responsible for hundreds of company closures and thousands of job losses.”
The Small Firms Association (SFA) said the banks’ failure to meet the €3bn target was unacceptable.
Patricia Callan, SFA director, said: “It is unacceptable at a time when access to finance remains the single biggest issue for the small business community that the banks claim that the reason they can’t lend is because there is no demand.
“The banks must improve their efforts to communicate with customers that they are open for business, and this must be evidenced in having experienced staff in all branches that are able to make coherent business banking decisions, based on an assessment of the business-person and their business plan rather than security and personal guarantees.”
Mr Trethowan also claimed businesses looking for credit needed to have a suitable business plan.
“It’s all very well playing the blame game and pointing the finger, but if you haven’t got a well-constructed request to a bank for credit then it makes it difficult for them to help you,” he said.
Mr Trethowan said the group has saved more than 350 jobs by ensuring that banks free up credit.
The Irish Banking Federation welcomed the call for businesses to ensure they have proper business plans in place.