SME bank lending rates increase in Q1 2015

The latest Irish Small and Medium Enterprises Association (ISME) Quarterly Bank Watch Survey reveals bank lending rates to small businesses increased in the first quarter of 2015.

It’s the fourth successive quarter of improvement in SME success rates for bank loan applications. The survey also notes that demand for credit has remained high among the small business community with 43 per cent seeking finance.

Less than a third (32 per cent) of Irish SMEs applying for funding in the last three months were refused credit by their banks – an improvement on the 38 per cent refusal rate experienced in the previous quarter.

Almost half (47 per cent) of respondents go to banks they’ve been customers of for more than 20 years, with informal applications increasing from 75 per cent to 81 per cent in Q1 2015.

Mark Fielding, CEO, 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.”

Fielding hopes the upcoming SBCI will return lending rates to “normal” levels, although the banks’ tardy decision making and increasing fees came in for criticism.

“One major concern is the delay in decision making by the banks, with 27 per cent of decisions pending and the length of the lending process now stretching out to eight weeks,” added Fielding.

“The imminent opening of the SBCI is a welcome initiative and it is hoped that lending rates will come back to a more normal figure once this funding comes on stream on the 9^th of March.

“The fact that 28 per cent of SMEs are planning to apply for SBCI funding shows the demand for longer term funding, which is more appropriate for growing SMEs.

“However, the cost of funding and indeed bank charges across the board are of major concern.

“SME owner managers are experiencing large increases in bank fees and this is wreaking havoc on already weak profit margins.”

Date published 12 Mar 2015 | Last updated 12 Mar 2015