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Survey shows hopeful signs for SMEs

Tuesday, December 03 11:51:38

An independent report from Red C for the Department of Finance has found evidence that conditions are improving for Ireland's embattled SME sector with real signs of growth.

It found that 72pc of SMEs have seen an increase or no change in their turnover of the business in the last six months; this is an increase of 10pc on the previous six months survey.

Some 34pc of SMEs report an increase in turnover which is a 9pc increase on the last six months while 38pc have seen no change in their turnover.

It also found that 21pc of SMEs have increased staff numbers in the past 6 months - this is up from 14pc in March 2013 and 17pc a year ago.

We also see less SMEs having reduced staff numbers in the past 6 months 12pc - down from 16pc in March 2013.

This means that, for the first time in the credit demand tracking survey series, we see more SMEs having increased staff numbers than SMEs decreasing staff numbers.

Looking at credit access for SMEs, it found that 80pc of application requests were granted and found that more than half of all SMEs 51pc now agreeing that the banks are lending. This is up from 47pc in March 2013 and 39pc in September 2012.

Nearly three quarters (73pc) those SMEs who have been declined bank finance disagree with the reasons given for the refusal. This is however down slightly for the fourth period in a row compared to March 2013 77pc, September 2012 78pc and March 2012 81pc.

Critically there has been a significant improvement in the proportion of declined applicants who have been informed of a reason for the decline. Those claiming to have not been given a reason for the decline in credit now stands at 10pc, down 11pc on the previous period and 14pc year on year.

Only 5pc of SMEs surveyed believe the banks are not lending and did not apply for credit.

Reacting to the survey, Avine McNally, Acting Director, SFA said a worrying trend from the survey is that more conditions are being attached to credit approvals, 78pc of respondents who had credit approved sated that conditions were attached - 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."

McNally noted that the majority of applicants (73pc) who have been declined credit don't agree with the decision. In addition, the time for a decision averaged 21 working days, with just over half of the applications processed within the target of 15 days.

"It is critical in rebuilding the small business banking relationship, that clarity is given around decision-making rationale and that process targets of 100pc of applications being dealt with in 15 days and all declines being informed of their right of appeal are achieved swiftly."