New research released today by the Central Bank of Ireland has found that the SME lending market has become more concentrated in the last six months, with fewer banks holding an ever larger market share. This holds both in terms of outstanding credit and new lending flows.
The figures show that annual gross new lending to non-financial, non-real estate SMEs in the third quarter 2017 was 24% higher than a year ago, with the largest increases in the Wholesale, Retail, Trade and Repairs (73%), Hotels and Restaurants (39%) and Manufacturing (39%) sectors.
Credit demand is low with the share of SMEs applying for bank loans at 21% in September 2017 according to the ECB SAFE survey. Working capital is the primary purpose of internal and external financing.
The share of SMEs in Ireland reporting they did not apply for bank loans because of sufficient internal funding was 50.4% in September 2017. In comparator groups of European countries the share was 49.5% in EA1 countries (Austria, Belgium, Germany, Finland, The Netherlands and France) and 37.9% in EA2 countries (Portugal, Italy, Spain and Greece).
SME loan rejection rates in Ireland have increased to 13.9% in September 2017 from 8.2% in March 2017. More SMEs in Ireland are reducing their debt-to-assets ratio than increasing it, with a net percentage change of -12.6% reported in September 2017.