48% of SMEs refused credit in last three months

Almost half (48 per cent) of Irish SMEs who applied for funding in the last three months were denied credit by their banks, according to new data from ISME’s quarterly survey.

The latest figures from the representative body for Irish SMEs are up on the 45 per cent refusal rate in the previous quarter.

The propensity of banks to refuse small business loans continues to irk ISME’s chief executive, Mark Fielding, who believes this is “preventing small businesses from capitalising on the economic recovery and the development of their businesses”.

“In many cases we are finding that the risk-averse banks have not trained their officials appropriately and they do not have the necessary expertise to analyse funding proposals,” added Fielding.

“Innovative SMEs with new or niche products cannot then access funding and good ideas are being postponed or discarded.

“We have now seen refusal rates increase for two successive quarters. It is imperative that Government acts now to ensure that the State-owned banks are lending appropriately for a growing economy.”

Mr Fielding blames a lack of expertise within banks themselves as the key reason for the “over-reliance on personal guarantees” to obtain business funding.

However, there was some positive news within the latest ISME survey, with the Awareness of State assistance – including the Credit Guarantee Scheme and Microfinance Ireland – was high at 64 per cent and 60 per cent respectively.

The number of SMEs making formal loan applications to their banks is also increasing, with almost two-thirds (61 per cent) applying using formal procedures.

Meanwhile of the 52 per cent of SMEs approved for funding, three-quarters of these have drawn down the finance either in full or in part. Half of the respondents had also been customers of their banks for more than 20 years.

Date published 7 Dec 2015 | Last updated 7 Dec 2015