Irish SMEs least likely to apply for intermediated debt

Small and medium-sized businesses in Ireland are more reluctant to apply for intermediated debt than their counterparts in other euro zone countries for fear their application will be rejected, a new study has found.

The research, which looked at the reasons why company owners don’t apply for debt, shows Ireland firms in Ireland have the greatest non-application rates because of rejection across nine member states.

Intermediate debt is a type of fixed income security with a maturity that is set to occur in the next 3-10 years.

Overall, 44 per cent of Irish SMEs surveyed said they would not apply for intermediated debt due to concerns that their applications would not be well received. This compares to just 6 per cent of companies in Finland. Germany had the second greatest number of non-application rates at 24 per cent, followed by Greece, Belgium and Austria.

The study was jointly carried out by Ciarán Mac an Bhaird, a lecturer at Dublin City University, Brian Lucey, professor of finance at the School of Business, Trinity College Dublin, and Javier Sanchez Vidal of the Technical University of Cartagena.

The research found that compared with firms that applied for bank loans, “discouraged” borrowers tend to be smaller, younger, have declining turnover and an increasing debt to assets ratio.