Cantillon: credit flowing to SMEs – after delays

SMEs have long complained about how difficult it is to access finance, something the Government belatedly acknowledged when it established the Strategic Banking Corporation of Ireland (SBCI) late last year. The SBCI is intended to make it easier for small and medium-sized enterprises to avail of credit by offering loans that are up to 2 per cent cheaper than current market rates.

According to AIB, which along with rival Bank of Ireland, is channelling some €400 millions of funds into the sector via the SBCI, the move is working. Figures released yesterday shows the bank approved more than €60 million in business credit to over 1,300 customers in the first three months since its scheme launched.

Bank of Ireland hasn’t released a breakdown for its SBCI-backed fund. However, last week it announced that new credit approvals to SMEs to the end of March rose by 24 per cent on the same period a year earlier to €1.24 billion with over 17,500 applications received, up 12 per cent year-on-year. Loan approval rates remain constant with around 87 per cent of applications approved.

This is all good news for companies that have been starved of the finance needed to grow their business. It remains to be seen whether it is enough. A survey by lobby group Isme in March confirmed that small and medium-sized firms were finding it easier to access credit but also found that many companies face long delays in getting loan approval. The study showed companies were waiting up to eight weeks before being able to draw down loans.

The SBCI has said the next tranche of funding will be spread to other financial institutions to promote competition within the Irish banking sector. This should boost the numbers of SMEs able to access credit but unless the loan approval process is speeded up, it may be too late for some companies.