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Dublin: 10 °C Wednesday 23 April, 2014

ISME: Delays in bank lending decisions a ‘cynical smokescreen’

Latest figures show a 57 per cent refusal rate by banks to small- and medium-sized firms.

Image: Bank Loan via Shutterstock

THERE HAS BEEN a significant decline in lending to SMEs in Ireland over the past three months.

According to the latest data published by ISME today, the refusal rate is now 57 per cent – 13 points worse than the figure in June and the worst since September 2011.

However, there has also been a fall in the demand for credit, down from 41 per cent in the previous quarter to 36 per cent between June and September.

Forty per cent  of requests were for term loans, with 34 per cent for overdrafts or alterations to existing facilities. Invoice discounting/factoring accounted for seven per cent of requests with another 16 per cent requesting leasing.

In a statement, ISME claimedthe cynical delaying of decisions by the banks, despite the Code of Conduct for SME lending, is tantamount to a ‘constructive refusal’”.

The group has called on the government and the Central Bank to investigate the “inordinate delays” in getting a decision from lenders.

Currently, the average waiting time is five weeks – and not 15 days as is set out in the Code.

“Banks are not lending to the level appropriate to an economy ‘on the mend’,” said chief executive Mark Fielding. “The statistics from our own Central Bank, the ECB and numerous economists, demonstrate the dearth of appropriate credit.

We must put an end to the fiction that bailed out Irish banks are functioning properly.

“Despite assertions from the banking PR machine, access to credit is abysmal, the application process is getting more torturous, while ‘zealous’ bankers terrorise owners of small and medium businesses with legal letters of foreclosure, rather than negotiate an economic settlement.”

The Quarterly Bank Watch Survey was compiled last week with questions sent to more than 1,000 owner-managers. It also found that 12 per cent of respondents who required finance did not apply to banks for various reasons, including being actively discouraged by the bank and fear of a reduction in existing facilities.

The vast majority of those surveyed are customers of their banks for more than five years, with just under half with the same lender for longer than 20 years.

Read: Banks loaned just €3m to scientific research SMEs since 2010

More: Big businesses are ‘the main culprits’ in late payments

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