Banks rejected nearly 60% of firms' loan applications

ALMOST THREE out of five loan applications by small businesses in the last three months were turned down, according to research by Isme.

The Bank Watch Survey, published by the small firms’ representative agency, found 58 per cent of the 400 respondent firms were refused credit. Chief executive Mark Fielding said this had serious ramifications, even for viable companies.

“Contrary to public statements issued by the banks, there is clear evidence that they are making it as difficult as possible for business customers to access badly needed credit, with serious ramifications for those concerned,” he said.

Isme said the proportion of firms refused credit in the last three months had increased from 48 per cent in the previous report.

He accused Irish banks of duplicity and said a refusal to provide “profitable businesses” with access to loans or overdrafts would result in company closures and job losses.

However, Felix O’Regan, spokesman with the Irish Banking Federation, said “in no way should people come away with the impression that banks are not there to lend”.

He said businesses in Ireland were facing similar credit restrictions as those in the UK and Europe.

“We don’t know what line of business the respondents to the Isme survey are in,” he said.

“They could be firms that are very exposed to the slowdown in consumer spending.”

Mr O’Regan said a study by accountancy firm Mazars would provide clarity about the extent of lending to small and medium enterprises.

This report was the product of talks between representative bodies such as Isme, the banks and the Department of Finance, which set the terms of reference.

The study is being paid for by the banks and is expected to be published over the summer.

The Department of Enterprise, Trade and Employment said last night that it was “proceeding immediately with the setting up of a Clearing Group to assess patterns of lending where the flow of credit to viable projects appears to be blocked, and to seek to identify credit supply solutions”.