Most SMEs do not shop around for finance, says survey

Almost three-quarters of Irish SMEs only approach one institution when seeking finance, according to a new survey.

The two-part BFSI SME Tracker, a survey conducted by Behaviour & Attitudes for Bibby Financial Services Ireland, conducted among 350 business owners to track the experience of SMEs in Ireland, found that 74% do not get external advice, outside of their company, when seeking funding.

The results show that almost one quarter of Irish SMEs do not get any financial advice and deal directly with their bank when seeking finance.

Of those who do not seek any advice, over a half said that they are used to dealing directly with the bank, 17% cited the cost of using external advisers as prohibitive, while one in 10 rely on family and friends.

The survey results found that one in five Irish SMEs have sought external finance in the last 12 months, with 26% expecting to do so over the next 12 months.

Larger companies with 10 or more employees - 35% of those surveyed - and companies outside of Dublin - 16% of those surveyed - are more likely to have sought finance in the past six months, than smaller or Dublin based companies.

Exporting companies, which represent 35% of companies surveyed, are most likely to have sought finance in the past six months, when compared with non-exporting companies.

The most popular form of finance sought is a bank loan with almost half of those surveyed seeking a loan with 35% looking for an overdraft.

On average, the length of time taken to process finance applications was eight weeks.

The results were published as Mr John Corrigan, CEO NTMA, warned at the SFA conference last week that companies will need to look beyond the bank if they want to grow and that this will require a big cultural shift for businesses who rarely consider other options.

BFSI issued part one of the two-part survey earlier this week which found that almost half of Irish SMEs reported increased sales in the first quarter of 2014.

According to Ronan Horgan, Managing Director, BFSI, the results reflect a "growing SME sector in Ireland".

"Sales are up, the outlook is positive and SMEs are seeking finance, he said.

"This is reflective of a positive stance for a sector which is the backbone of the Irish economy and has the most potential to create and maintain jobs in the Irish economy.

"However, this can only be maintained with strong and adequate financial support. The fact that the vast majority of Irish businesses do not seek financial advice is worrying, particularly when many banks may not be in a position to finance. Equally worrying is an eight-week process period.

"Many SMEs are exporting and taking advantage of growth in the EU and US markets. This growth is rapid and generally requires funding to take on new orders, meet additional payroll requirements or safeguard themselves from late payments.

"SMEs require a culture change and need to look to alternative sources of funding, which can process applications in a matter of days, to support these requirements."