ISME: Banks in danger of slipping back into 'old ways'

The Irish Small and Medium Enterprises Association (ISME) has warned that delays in bank decision times for SME loans are placing unnecessary constraints on SMEs and their growth.

The ISME released its Quarterly Bank Watch Survey on Friday, with results indicating a marginal increase in bank refusal rates and a subsequent drop in demand.

Mark Fielding, CEO, ISME fears the latest figures suggest that the banks are in danger of reverting back to their previous ways of the “long no”.

“The substantial increase in the length of time it is taking to get approval on a loan demonstrates a complacent and lazy attitude from bankers,” said Fielding.

“The delay in decision time has increased from 7 to 8.5 weeks and is a cause of concern and totally unsatisfactory, as it has major implications for businesses.

“As a result of this deterioration in bank service an unacceptable 26 per cent of SMEs were awaiting decision at the survey date. This figure has risen from 21 per cent in the previous quarter and access to credit is patchy and the refusal rate increasing slightly to 36 per cent confirming that Irish banks are not functioning properly.”

The delays and refusals are even less acceptable when it would appear there has been a marked growth in the number of formal applications from SMEs to banks, up from 54 per cent to 63 per cent.

“One of the keys to economic revival and sustained recovery is a properly functioning banking system, with proper resources and well informed and trained staff,” added Fielding.

“The lack of awareness among banking staff of government financial assistance schemes, which can act as a lifeline for a business, is unacceptable.

“It is incumbent on banks and their staff to inform businesses of the available assistance schemes, failure to do so will have negative impact on SME business.”

The ISME wants the Government to ensure that SBCI funds are promoted by banks and used appropriately for SMEs; finalise the restructuring of the Government Credit Guarantee Scheme and promote it alongside the Microfinance Scheme; investigate the increasing delays in bank decisions; demand outsourcing of better management for bailed-out banks to oversee their lending policies; provide reliable reporting from the rescued banks via the Department of Finance and Central Bank; and finally investigate additional sources of finances that can be made available to cash-starved small firms.

“The most pressing issues highlighted in this survey is the deterioration in the expected service from our rescued banks who are reverting to the ‘slow no’ and the ‘delay till they go away’ methods,” concluded Fielding.

“Eight weeks to make a decision is not acceptable in an economy striving to grow and meet the challenges of Brexit, increasing costs and political uncertainties.”

Date published 19 Sep 2016 | Last updated 19 Sep 2016