THE NUMBER of businesses being refused loans by banks is falling, but so is the number looking for credit, according to a survey by lobby group the Irish Small and Medium Enterprises Association (Isme).
The number of companies refused credit fell to 42 per cent in the third quarter of this year, compared to 55 per cent in the second quarter.
However, the number of companies making informal approaches to banks for credit fell from 88 per cent to 62 per cent while the number making formal written approaches was down from 53 per cent to 45 per cent.
Just over half – 51 per cent – of requests were for overdrafts, with 31 per cent for term loans.
Isme said the “improvement” was welcome but refusal rates are still twice the level they were at in “normal times”.
“The fact remains that almost half of businesses that applied for credit in the last three months have been refused. These businesses, in many cases, will have no alternative but to downsize and reduce employment.
“Unfortunately, the future for these companies remains bleak, due to the unwillingness of the bailed out bankers to accommodate their long standing viable but vulnerable customers,” Isme chief executive Mark Fielding said.
The survey – conducted among 8,500 Imse members and based on 868 responses – found that 83 per cent of businesses believe banks are making it more difficult to access finance. This was almost unchanged from 82 per cent in the previous quarter.
Awareness of the measures implemented by the banks and Government in response to pressure from business over the tightening of credit has improved, according to the survey.
Some 42 per cent of the companies surveyed were aware of the the internal appeal processes the banks are obliged to put in place, while 41 per cent of small and medium business owners are aware of the Credit Review Office that oversees appeals.
Isme called for the establishment of a specific business lending bank. However, the Government is working on a targeted loan scheme for small firms. The Minister for Enterprise, Trade and Innovation Batt O’Keeffe told a meeting of the rival Small Firms Association earlier this month that the scheme would “target market failure in small business lending when commercially viable businesses fail to get credit because of insufficient collateral and information deficits despite having demonstrated an ability to repay”.
John Trethowan, the former banker who heads the Credit Review Office, has expressed doubts about such a scheme because of the liability for the taxpayer.
