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Firms claim banks are still not lending

Tuesday, March 12 11:43:12

Banks are still not lending to business with over half - 52pc - of credit applications still being refused, according to the latest ISME Quarterly Bank Watch Survey, issued today.

The survey also found that demand for bank credit has shown a small reduction, down 4 points to 35pc.

Some 35pc of respondents had requested additional or new bank facilities in the last 3 months, showing a decrease from the 39pc in the previous quarter.

It found that 15pc of initial bank decisions were made within one week; a deterioration from the 25pc in the previous quarter.

It took another 5 weeks, on average, to get a decision, again a deterioration from the 4 weeks previously reported, ISME said, while 12pc of respondents who required bank finance did not apply for various reasons.

Of those 31pc were actually discouraged by bank from making application, 25pc were afraid of a reduction in existing facilities and 19pc were afraid of refusal.

Of the 48pc approved for funding, 71pc have drawn down the finance either fully or in part and 43pc of requests were for overdrafts, with 40pc for term loans, or alterations to existing facilities, while invoice discounting/factoring accounted for 5pc of requests, with 12pc requesting leasing.

Some 40pc of respondents had increases in bank charges imposed.

ISME demanded that the Government, through the Central Bank investigate the inordinate delays in getting a lending decision, averaging 5 full weeks instead of 15 days as set out in the code of conduct.

"The results of this survey demonstrate, quite categorically, that the banking system for SMEs is not working, despite the vulgar and misleading advertising by the bailed-out banks," said ISME CEO Mark Fielding.

"While it may suit the Administration to believe the bankers' fiction, the truth of the matter is that banks are deleveraging through curtailing SME lending, thereby sabotaging the economic recovery through pure self-interest".

"The experiment of "leaving the banks to their own devices" and expecting voluntary codes to solve the problems must now cease. Government must take a much more hands on approach or bankers will continue to distort statistics, delay reform and feel free to terrorise small and medium businesses, in their never ending drive to maximise their own profits. The economic revival needs a properly functioning banking system. While it is true that the payments system is working and ATM machines are open, the level of engagement of the rescued banks in assisting the SME sector is negligible. Credit lines are being restricted, deadlines missed, decisions delayed while the banks themselves continue their Jeckyl and Hyde act of 'open for business' while refusing more than half of all genuine SME credit applications," added Mr Fielding.