Defaults fall but SMEs face higher interest payments

Irish SMEs are paying higher interest rates on their loans than many of their European counterparts while recent EU-wide decreases haven’t materialised in the domestic market either.

The Central Bank’s latest SME Market Report shows Irish firms are paying more for credit than their contemporaries while the research also finds rates did not decline in line with the euro area from 2014.

Data compiled for the six months to September of last year show an average interest rate of 5.7% for loans of €250,000 or less.

This is 1.8% higher than the average rate charged on loans above this threshold and 3.4% higher than loans of over €1m Despite Irish firms having to contend with more expensive bank financing, SME default rates are in decline.

The rate of default has fallen over the past two years, from 26% in 2013 to 19% in 2015.

New lending to non-financial and non-real estate SMEs has picked up strongly since the beginning of 2014.

The overall stock of lending has declined as firms continue to repay loans at a faster rate than they take on new debt.

Since the last report, the stock of SME loans has declined a further 8%, while the share of SMEs with no outstanding debt is increasing.


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