Bank lending to SMEs tightens further, survey finds

Bank lending to small and medium-sized businesses is down, according to the latest quarterly survey conducted for Isme, the sector’s representative association.

It has expressed disappointment at the findings of the survey, which indicates a 57 per cent refusal rate, down 13 points on the figure in June and the worst score since September 2011. Demand for bank credit has dropped to 36 per cent from 41 per cent, the survey also found.

The organisation said the cynical delaying of decisions by the banks, despite the code of conduct for SME lending, was tantamount to a constructive refusal. The survey found that 66 per cent of respondent firms believed banks were making it more difficult to access finance.

Delays
The association demanded that the Government, by way of the Central Bank, investigate the "inordinate" delays in getting a decision, averaging five full weeks, instead of 15 days as set out in the code.

The survey was conducted last week and was responded to by 1,026 owner-managers of SMEs . It found that 57 per cent of companies that applied for funding in the last three months were refused credit by their banks, a deterioration from the 44 per cent refusal rate seen in the previous quarter.

The chief executive of Isme, Mark Fielding, said recent figures demonstrated that both rescued banks were going well beyond the PLAR (Prudential Liquidity Assessment Review) element of their programme, aimed at reducing the quantity of loans on their balance sheets. "They are doing this by curtailing SME lending. Minister for Finance Noonan must demand to see the books on this element alone as it will give the answers to questions being asked by Isme since the start of the bank bailout."

Mr Fielding said the banks were not lending at a level that was appropriate to an economy “on the mend”. The statistics from the Central Bank, the ECB and numerous economists demonstrated the dearth of appropriate credit, he said.

“Despite assertions from the banking PR machine, access to credit is abysmal, the application process is getting more tortuous, while ‘zealous’ bankers terrorise owners of small and medium businesses with legal letters of foreclosure, rather than negotiate an economic settlement.”