Business groups call for banking credit

A number of business groups have today told an Oireachtas committee that greater bank credit is needed urgently to support companies.

The Oireachtas Joint Committee on Finance and the Public Service is today hearing submissions from interested parties on banking credit and loans and their effects on businesses.

Appearing before the committee, the chairman of the Irish Small and Medium Enterprises Association (Isme) said there is clear evidence of credit tightening by the banks in recent months and that SMEs are having “significant difficulties” in accessing credit.

“The knock-on effect of this type of action by the banks will be that companies who have previously weathered tough times will now have to reduce staff or even close down, unless they can avail of badly needed financial support,” J.J. Killian said.

“Businesses, particularly those who are experiencing late payments, are unable to meet their payment terms to their suppliers, creating a domino effect throughout the economy and ultimately closure of otherwise profitable businesses.”

Mr Killian told the committee: “A number of banks have recently announced a specific fund for SMEs but ISME is yet to be convinced that this is not just a PR exercise. Our most recent statistical and anecdotal evidence reflects no easing on credit and we remain to be persuaded by the banks’ assertions that they are “open for business”.

Irish hoteliers said a “major change” was needed in the criteria used by financial institutions in making credit facilities available to the hotels sector in the difficult economic environment.

In his submission to the committee, Irish Hotels Federation (IHF) chief executive John Power said the sudden fall in economic activity in Ireland during the second half of 2008 and the anticipated 4 per cent further decline in 2009 was creating “very serious” cash flow positions for many hotel and guesthouses.

"It is our view that the banks currently treat hotels and guesthouses as a high risk sector and that this is driving the reluctance to provide adequate short term financing at appropriate costs and conditions.

“It is our contention that the economic benefits from the sector are such that this approach is short sighted and inappropriate. We believe that the banks' lending and loan application skills have been honed over 13 years of growth and that a new approach must be adapted in the current economic crisis."

He called for the creation of an SME credit monitoring committee to provide a monthly assessment of the availability of credit within two weeks of the end of each month. The IHF also called on the Government to ease the taxation payment requirements on enterprises.

The Small Firms’ Assocation (SFA) urged the Government to introduce direct measures to guarantee small business loans and to pay its bills within 10 days.

SFA director Patricia Callan has said that “decisive action” is needed to resolve the cash-flow issues facing most small businesses throughout the country.”

Addressing the committee, she said "only time would tell" if additional targeted funding SMEs "is in fact new real money and whether it will get to those who desperately need it".

She said the Government should also be applying pressure on the European Investment Bank to bring forward its decision meeting on applications received from Irish banks to access its special €15bn SME fund from March.