Lending to small firms worsens

Small firms are finding it increasing difficult to access credit, according to a new survey from business group Isme.

The organisation's latest Quarterly Bank Watch Survey reveals that banks are refusing 48 per cent of credit applications from its member companies. This compares to a refusal rate of 33 per cent in the preceding quarter.

In addition, 79 per cent of firms have reported finding that banks are making it more difficult to access credit, compared to 68 per cent in the last survey.

The study also shows almost one in four companies who had a change in their facilities in the last three months, were requested by their banks to reduce their overdraft levels.

Isme chief executive Mark Fielding said the survey findings were alarming and showed the issue of bank credit remains a serious problem.

"The results clearly indicate that despite assertions to the contrary from the banks, access to bank credit has deteriorated. It is quite clear that the previous administration's instructions to open up lines of credit to business have patently been ignored by the banks," he said.

"The new Government must take a much stronger position with "bailed out" bank management and insist on their compliance with instructions," Mr Fielding added.

Isme has called for the immediate introduction of the planned State Investment Bank to ease credit difficulties for small firms. It has also said the Credit Review Office process to be taken over by the Central Bank and to include representatives from outside of financial institutions.

"There cannot be any more obfuscation, statistical hoodwinking and downright disobedience from the banks. The eyes of the SME sector are now firmly on the new Government and their credibility will be assessed on the basis of how they deal with the errant bankers on this crucial issue, so important to the economy and the small and medium business sector in particular," said Mr Fielding.

However, the Irish Banking Federation, which represents over 70 financial institutions, rejected the Isme survey which it said was based on "spurious research and is highly misleading."

"The independent, Government-appointed Credit Review Office shows that viable businesses can and are obtaining credit. IBF strongly encourages businesses seeking credit to apply to their lender with a fully-supported application," it said in a statement.

A report from the Credit Review Office which was published last month, showed both AIB and Bank of Ireland were on schedule  to meet lending commitments to small firms included in lending plans submitted to both the Department of Finance and the review office last May.

Under targets set by former minister for finance Brian Lenihan, both banks are expected to have issued €3billion in new lending each by April.