Irish SMEs are the second most likely businesses in Europe -- after Estonia -- to have their bank loan applications rejected, according to a stark new survey by the European Central Bank (ECB) and European Commission.
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A recent report from the Credit Review Office, set up to assist SMEs to secure funding from state owned banks, reported a decrease in SMEs seeking credit from Irish banks
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Minister for Finance Michael Noonan early last week made reference to the Government’s Loan Guarantee Scheme in Budget 2012 in an attempt to assist SMEs secure credit
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The following day the European Central Bank (ECB) and European Commission released findings from a European-wide survey which reported that Irish SMEs are the second most likely in Europe to have a bank loan application rejected.
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22.6pc of Irish SMEs surveyed in the ECB and European Commission survey have had a loan application rejected outright in the last six months - twice the European average.
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Latest figures from the Asset Based Finance Association, (ABFA), have reported that the level of invoice finance funding in Ireland and the UK has risen to almost €19 billion, its highest value since the start of the recession.
Graham Byrne, Bibby Financial Services Ireland Director comments:
“The findings from the ECB and European Commission survey will be no surprise to SMEs who have faced credit rejection from Irish banks for the last number of years. Given the conditions, it is understandable that SMEs are hesitant or indeed unwilling to approach Irish banks for credit. The reduced number seeking credit from Irish banks as reported by the Credit Review Office is not due to lack of demand but rather a lack of incentive. The question is, what impact will the Government’s revised Loan Guarantee Scheme have in reality, or is it going to be a case of more window dressing.
“As a company that has worked with failed Government Guarantee Schemes in other jurisdictions, we are sceptical of what the Irish Government can offer that is effectually different. It remains unclear what exactly the long talked about revised Scheme will look like and we envisage another slow implementation of whatever form it takes. The Government is missing an opportunity to overhaul how SMEs perceive, use and access credit; the world of business has moved on, Irish SMES are moving on and it is time the Government started implementing relevant and workable initiatives to assist SMEs in an ever-changing business landscape.
“Businesses are no longer willing to jump through unnecessary hoops in the hope of securing inflexible funding, only to be eventuality rejected on very weak grounds. As a result, SME’s are having to adapt to a changed business environment, as the figures from the ABFA indicate. The ABFA further report that the level of turnover from Irish and British companies using invoice finance is also at its highest rate standing at over €73 billion – which also underlines the view that firms using invoice finance are actually growing their sales and continuing to trade successfully.”
Posted on 13 December 2011