58% of small firms refused credit

More than half of small businesses have been refused credit by their banks in the last three months, according to research by representative agency Isme.

Chief executive Mark Fielding said the number of firms being refused credit had increased to 58 per cent from 48 per cent in the previous survey in February.

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

“The results indicate that the situation is deteriorating and that the blame lies firmly with errant bankers and their selfish lending policies,” Mr Fielding said.

“Sound profitable businesses, which require credit facilities, are among the companies being refused. The result is that companies either have to put plans on hold or are faced with increased cash flow problems, which in many cases is threatening the viability of the businesses concerned”.

He said it appeared the various schemes announced by banks to support SMEs were publicity stunts.

“With the securing of badly needed EIB funding, the situation for SMEs is worse than ever. It is obvious therefore that the banks ‘initiatives’ are nothing more than PR stunts, in an effort to give the impression that they are open for business, whereas in fact the opposite is the case,” he said.

Broken down by lender, 55 per cent of applications to AIB were declined, 58 per cent of firms were denied credit by Ulster Bank while Bank of Ireland refused 67 per cent of requests, according to ISME.

Leo Varadkar, Fine Gael enterprise spokesman said the Government should set up a State-backed loan guarantee scheme to assist businesses unable to raise credit from the banks.

He said banks had no excuse for withholding credit from viable companies.

A State-backed loan guarantee “would see the State acting as or new loans being sought by viable businesses, and would help them to stay afloat and protect their workforce.”

The Institute of Certified Public Accountants said the Isme report endorsed the findings of its own survey to which 89 per cent of respondents said they had evidence of viable businesses encountering trading difficulties because of a lack of credit from their banks.

John White, CPA president said the taxpayer had provided €7 billion to recapitalise AIB and Bank of Ireland and would underwrite ten of billions worth of loans through the creation of NAMA.

“It is farcical that these same banks are now unable to provide credit to the sector which will be at the centre of our recovery.”