The Irish Small and Medium Enterprises Association (ISME) has released its latest Quarterly Bank Watch Survey, revealing that refusal rates have decreased slightly and the demand for bank credit has increased.
Amongst the survey’s finding was that 41% of respondents had required either additional or new bank facilities in the last three months, compared with just 35% in the previous quarter. Furthermore, 43% of companies that applied for funding in the last three months were refused credit by their banks, a decrease on the 48% refusal rate in the previous quarter.
There have also been some improvements in the length of time it takes to make decisions, and in the number of decisions pending. Around a third of initial bank decisions were made within one week, up from 22% in the previous quarter, and 15% of decisions are pending, compared to last quarter’s 19%.
The average initial decision time now stands at just over 4 weeks, while the wait to drawdown has decreased from 3 to 2 weeks.
While the Association has welcomed these findings as a reflection of the improving economic situation, it has also warned that refusal rates are still too high.
ISME CEO, Mark Fielding commented, "We are pleased to see a small improvement in bank credit refusal rates in this quarter and we hope that this is the beginning of sustained progress on this issue.
"Recent results have seen us take two steps forward just to fall one step back as it seems the banks are not able to deliver consistent improvements in this area. This remains a vital issue for the SME sector and will be particularly pertinent as small businesses go for growth, now that we have finally entered a period of recovery."
The survey results also raised concerns about the level of guarantees that small businesses are required to produce, which in many cases are in excess of the amount required. The ISME found that in 41% of cases the guarantee was not returned after the loan was paid off, creating a barrier for companies in accessing additional or alternative finance.
"Much of the problem here stems from inadequate training of bank staff that do not have the necessary skills and expertise to analyse businesses proposals," said Fielding.
"The lack of awareness among bank staff of the SBCI funds and the Credit Guarantee Scheme means that SME businesses remain unaware of their existence. This loan funding must be better promoted to SMEs as there is an onus on banks to inform loan applicants of its existence," he added.
Finally, 72% of the survey’s respondents stated that the Government is either having a negative or no effect on SME lending. However, awareness of government assistamce schemes remains high, with 79% aware of the Credit Review Office, 60% aware of the Credit Guarantee Scheme, and 55% knowing about the Micro Finance scheme.
© 2016 - Checkout Magazine by Jenny Whelan.