SMEs waiting 29 days for loans
Just over half of all loan applications submitted by Small and Medium Enterprises (SMEs) are being processed within the required 15 day period, according to research published today.
A survey carried out by Red C on behalf of the Department of Finance showed companies are waiting an average of 29 working days for their credit applications to be approved or declined, 14 days longer recommended in the Government’s code of conduct on lending to small business.
Demand for credit by small and medium enterprises has increased slightly while the percentage of loans approved by banks is also on the rise, the figures also show.
Of the requests for credit submitted to financial institutions between April and September this year, 60 per cent were approved, marking a 1 per cent increase on the previous six months and a 6 per cent increase on the same period last year.
Some 19 per cent of applications were declined and 21 per cent were still pending when the survey of more than 1,500 businesses was carried out.
About four in every ten businesses reported that they had requested credit, mostly for cash flow and working capital purposes.
Of the 6 in ten who had not applied for a loan, 8 out of 10 said they did not need it or had sufficient internal funds, while 6 per cent did not apply because they thought the banks were not lending.
Some 39 per cent of businesses reported that they had requested credit, mostly for cash flow and working capital purposes.
Of the 61 per cent who had not applied for a loan, 79 per cent said they did not need it or had sufficient internal funds, while 6 per cent did not apply because they thought the banks were not lending.
Speaking on the publication of the findings today, Minister for Finance Michael Noonan said the survey should give confidence to SME owners and managers to invest in their businesses.
“The SME sector is a key driver of growth and jobs in the Irish economy,” he said.
“While there is no doubt that the operating environment is challenging and demand remains soft, stability is returning and our economy is growing again.”
The Government have introduced measures to support investment such as the Microfinance Loan Fund and the Temporary Partial Credit Scheme, Mr Noonan added.
“However, the banks have a key role to play and they must support investment by SME’s and provide credit to viable companies,” he said.
Lending targets of €3.5 billion in 2012 and €4 billion in 2013 have been set for both AIB and Bank of Ireland.
Mr Noonan also encouraged SMEs who have been refused credit to apply to the Credit Review Office, which is currently overturning 55 per cent of cases referred to them.