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SMEs seek more credit, refusal rate down

Tuesday, September 02 12:15:51

Demand for new credit by small and medium sized businesses rose in the last quarter while there was a significant drop in the numbers of firms being refused credit by the banks.

The latest ISME Quarterly Bank Watch Survey released today shows 42pc of companies who applied for funding in the last three months were refused credit by their banks, a big improvement on the 52pc refusal rate, seen in the previous quarter.

It also found that 44pc of respondents had requested additional or new bank facilities in the last 3 months, an increase from 32pc in the previous quarter.

Some 72pc of those who required funding made a formal application, an increase from 53pc in the previous three months while informal applications have decreased from 83pc to 71pc since the previous survey.

The survey found that 18pc of initial bank decisions were made within one week; a deterioration from the 20pc in the previous quarter and, on average, the initial decision time has increased to just over 6 weeks with the wait to drawdown at a further 3 weeks.

It found that 12pc of respondents who required bank finance did not apply for various reasons, a one percent increase over the previous quarter and 51pc of respondents are customers of their bank for over 20 years, while 89pc are over 5 years.

Of the 58pc approved for funding, only 66pc have drawn down the finance either fully or in part, an increase from 43pc in the previous quarter.

The Association welcomed the increase in SME formal applications but called on the banks to improve their decision time and also called for an increase in promotion of the Government Partial Guarantee scheme and the Microfinance scheme.

Commenting on the results of the survey, ISME CEO, Mark Fielding, said: "Small and medium businesses must be able to access bank funding if they are to take advantage of the current economic gains. SMEs have been struggling to access credit, due to a high refusal rate, so this decrease from 52pc to 42pc is very welcome, though long overdue. A notable and promising finding is the increase in formal applications from 53pc to 72pc. The Association has been encouraging owner-managers to make formal applications, as this greatly increases the likelihood of success. Informal applications have decreased from 83pc to 71pc, further proof of a shift towards the recommended formal route when approaching the bank."

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