Thursday, September 26 15:18:45
John Trethowan of the Credit Review Office today said that banks are continuing to lend to business but added that credit conditions for SMEs remain tight.
He said that the Pillar Banks have improved their lending to low to medium risk SMEs but are still rejecting other "bankable propositions" because they "may not 'tick all the boxes'.
He urged banks to work with businesses to help improve their proposal and said he expects banks to ensure adequate finance is available to viable companies. In the three years since the Credit Review Office was set up, it has found in favour of 55pc of borrowers' appeals, resulting in E18.5m in credit being made available to SMEs and farms, with 1,521 jobs protected or created.
Mr Trethowan said pressure on lending is increasing because of the reduced number of banks servicing the SME market.
However he said his office is seeing more appeal requests relating to credit for working capital and investment, which suggests improved confidence in the Irish economy.
He also said that economic activity is "recovering fastest around the major cities" but remains "very challenging" in other areas.
The Small Firms Association welcomed the report from Mr Trethowan and said that the report shows that the pillar banks are open for business.
However, Avine McNally, Acting Director, said we now need to see them lending to more challenging but viable businesses to ensure they can access the credit they require for working capital and investment.
"A key challenge is for the banking sector to effect real and meaningful debt restructuring where there is a substantive viable core business. While lending solutions must be found to allow SMEs deal with their legacy debt, we must ensure that in this process viable business are supported to ensure survival," she said.
This is not an easy process to undertake, as it will require not alone financial and banking skills, but will require knowledge of the business sector and environment and an appetite for enterprise risk," added Ms McNally.
She said a worrying trend regarding credit is that more conditions are being attached to credit approvals, these range from conditions of personal guarantees; facility charges and other specific security. "It is critical that in providing finance to the small businesses that the cost of credit is not too high and that loan terms and conditions are clear and manageable and do not act as a deterrent for business survival and investment."
Ms McNally highlighted that the front line experience is still an issue. "Banks still have a long way to go in standardising customer experience at branch level. It is critical in rebuilding the small business banking relationship, that communications are improved, that clarity is given around decision-making rationale and that process targets of 100pc of applications being dealt with in 15 days are achieved," she said.