Small firms access to credit hit by Ulster Bank departure

Credit Review annual report said alternative lenders would struggle to make up for the services provided by full-service lenders such as Ulster Bank, while credit unions will struggle to providing SME loans 'in the short term'

Report has said 'upheaval' at the exits of Ulster Bank and KBC banks will likely hinder small firms.

Credit Review, the body set up at the depth of the financial crisis 13 years ago to help companies access credit and survive, has said the "upheaval" at the exits of Ulster Bank and KBC banks will likely hinder small firms. 

In its annual report, the organisation said alternative lenders would struggle to make up for the services provided by full-service lenders such as Ulster Bank, while credit unions will struggle to providing SME loans "in the short term".

"The remaining banks have geared up to facilitate the migration of over one million current and deposit accounts, but many SMEs will require credit in the form of overdrafts, guarantees and stocking loans," Credit Review said in its 2002 report. 

"Customers seeking to migrate from exiting banks with credit blemishes will find it difficult to get credit approval," it said. 

Nonetheless, the report finds thanks to various Government subsidies and tax debt schemes, small firms were "resilient" despite facing the challenges from the pandemic, the inflation crisis, as well as the political and financial turmoil in Britain last year. 

"The expectation is that as the economy gets back on its feet, bank lending should grow, but growth could be hindered by increasing interest rates and increased economic uncertainty," the body said.  

"However, SME demand for bank debt and expectations of future demand remains low, with just 17% of SME’s seeking credit in the last six months or expecting to borrow in the next six months," it said.