Drawdown delays still an issue but SME credit flow improving

A new study has shown that whilst many SMEs are now finding it easier to access credit, some are still experiencing long delays in obtaining loan approvals.

The most recent ISME quarterly bank watch survey shows that 32 per cent of SMEs were refused loans during the past three months compared to 38 per cent in the previous quarter, an obvious improvement.  However, it also showed that 27 per cent of lending decisions are currently pending, and that some companies are waiting up to eight weeks to be able to drawdown loans.

The study data showed that 23 per cent of the initial bank decisions were made within a week, a decrease of 30 per cent over the previous quarter.  The average decision time on lending remains just over four weeks, with the wait to drawdown has increased from two weeks to three weeks.

ISME has measured demand for credit as high as 43 per cent, demonstrating that a number of SMEs are still planning to expand their business through effective use of loans.

Mark Fielding, chief executive, ISME, said: “Bank credit was largely unavailable to SMEs during the recession. This made a difficult business environment even more perilous for small businesses.

“It seems that the improvements in the economy have inspired the banks to reopen their purses and move towards healthier lending policies.

“SMEs are currently exploring ways to improve and expand their businesses and greater access to credit will certainly help this process.”

Almost half (48 per cent) of those approved for funding in the last quarter have chosen to draw down the finance either fully or in part, with 48 per cent of funding requests being made for term loans. More than a quarter (26 per cent) of the loan requests were for overdrafts or alterations to already existing facilities. 

The Strategic Bank Corporation of Ireland (SBCI) was set up in order to offer business loans at up to two per cent cheaper than the current market rates, and it’s no surprise to see that businesses are keen to access the funding.

Nearly a third of ISME member companies plan to apply for an SCBI loan, with the majority planning to do so in the next six months.

Despite the creation of the SBCI, many SMEs still believe that the Government could do more to help both small and medium sized businesses.  60 per cent of respondents to the survey believed that the Government was having either a negative (or no) impact on lending.

Date published 17 Mar 2015 | Last updated 17 Mar 2015