Banks’ SME loan refusal rate rises to 54%

The refusal rate by banks to lend to small businesses rose in the first three months to 54 per cent, according to the latest Quarterly Bank Watch Survey by the Irish Small & Medium Enterprises Association (Isme).

The survey found that in the three months to the end of February the rate of refusal increased from from 50 per cent to 54 per cent. Mark Fielding, Isme chief executive, said: "The survey results continue to paint a bleak picture of the SME lending landscape. The refusal rate has increased by four points to 54 per cent, just as the Government cancelled the requirement for the bailed-out banks to lend the required €8 billion to SMEs. The speed at which the banks have moved is in stark contrast to their delays in sorting out their balance sheets and expertise gaps.

"The fact that 69 per cent of SMEs continue to believe that Government has had a neutral or negative impact on SME lending is an indication of the perception of the performance of the current administration in relation to this problem. Economic progress will not be sustained if SMEs cannot obtain finance for growth. This trust is clearly misplaced and misjudged as refusal rates have already begun to creep upwards. Talk of a third bank is welcome but more immediate solutions must also be put in place."

Refused credit

The survey, was conducted among 924 owner-managers of SMEs and found that 54 per cent of companies who applied for funding in the last three months were refused credit by their banks.

Meanwhile 60 per cent of respondents had increases in bank charges imposed, while 18 per cent had incurred increased interest.