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Firms say banks still refusing credit

Tuesday, June 03 11:23:36

The situation regarding access by small and medium sized firms to bank credit has improved but the refusal rate is still too high.

That's according to the latest ISME Quarterly Bank Watch Survey released today by ISME, which shows a reduction in demand for bank credit and a continuing high refusal rate in the three months to end of May.

The survey showed that 52pc of companies who applied for funding in the last three months were refused credit by their banks, a slight improvement on the 54pc refusal rate, seen in the previous quarter.

It also found that 32pc of respondents had requested additional or new bank facilities in the last 3 months, a reduction from 39pc in the previous quarter and lowest demand since June 2011.

Some 20pc of initial bank decisions were made within one week; a deterioration from the 23pc in the previous quarter.

On average, the decision time has increased to just over 4 weeks and the wait to drawdown has increased from 3 to 5 weeks while 11pc of respondents who required bank finance did not apply for various reasons, a decrease from 17pc in the previous quarter.

Of those 42pc were actually discouraged by bank from making application and another 33pc were afraid of a reduction in existing facilities while 50pc of respondents are customers of their bank for over 20 years, while 85pc are over 5 years.

Of the 48pc approved for funding, only 43pc have drawn down the finance either fully or in part and 46pc of requests were for term loans, with 34pc for overdrafts, or alterations to existing facilities, while invoice discounting/factoring accounted for 5pc of requests, with 20pc requesting leasing.

The Association called for a speeding up of legislation to start the Strategic Banking Corporation of Ireland (SBCI), for which the ISME has been lobbying since the bank crash of 2010.

Commenting on the results of the survey, ISME CEO, Mark Fielding, said "The 'hunger march' for finance continues. How can we even hope to beat the recession when our SMEs are being refused bank loans and even when 'lucky enough' to get a loan, are hit with over-stringent collateral requirements and higher interest rates? The acceptance, without question by Government, of 'sugar-coated' lending figures from the banks must stop and more pressure exerted on banks to lend, based on the merits of applicants, rather than the need to reduce banks' balance sheets".