More small and medium firms refused funding

ISME, the Irish Small and Medium Enterprises Association, have released a new survey which shows more businesses are being refused loans.

The survey results show an improvement in time taken from decision to drawdown of credit, and the demand for credit by businesses. However, the Association said it is disappointed at the number of bank refusals this quarter. Refusal rates are too high, and more progress is needed said the lobby group.

“Access to finance is in the top three main concerns of SME owners, behind the cost of doing business and Brexit. While we welcome the increase in demand for credit, the increase in refusals from 23% to 28% is a matter of concern,” said ISME CEO Neil McDonnell.

“As formal Brexit talks start, it is vital that SMEs are supported in Brexit-proofing their business; this starts with accessible finance,” he said.

“Banks who decide not to provide capital to viable SMEs must apprise business owners of the reason for refusal, and of alternative sources of finance. The lack of awareness among bank staff of SBCI funds and the Credit Guarantee Scheme means that many SME businesses remain unaware of their existence,” Mr McDonnell said.

“These alternative sources of finance options must be better promoted, as there is an onus on banks to inform loan applicants of their existence,” he said.

The main findings from the survey showed that 28 per cent of companies who applied for funding in the last three months were refused credit by their banks, an increase on the 23 per cent in Q1.

In the same period 32 per cent of applications were still awaiting a decision at the end of May, a significant increase from previous quarter of 20 per cent.

“Failure by our traditional banks to lend adequately is concerning. The fact Irish SMEs are paying more to borrow than similar businesses across Europe raises many questions about banks relationship with SMEs,” said Mr McDonnell.

“If business are starved of credit, or forced to pay too much for it, they will face unpleasant consequences. We ask SMEs to tap into alternative sources of finance,” he concluded.