Bank lending to SMEs shows improvement

There was a continued reduction in the rate of bank loan refusals to small and medium-sized businesses in the three months to the end of November, according to new survey results.

The figures from the Isme Quarterly Bank Watch Survey come as AIB announced that its lending to SMEs in the Republic reached €5 billion in the year to the end of October, a 60 per cent increase on the same period last year.

The State-owned bank said the approval figure was reflective of the strengthening economic and financial environment, the bank’s sectoral-led strategy and its “capacity to robustly support its customers and the economy”.

Increased demand for credit was being experienced across a range of sectors, it said, including agriculture, transport, retail and hospitality. “AIB is also seeing an uplift in construction activity in both the residential and commercial real estate sectors in response to the underlying shortage of supply of properties,” the bank said in a statement.

It said it was also focused on supporting SMEs whose current banks were leaving the Irish market.

Isme said its survey, while finding that the refusal rate in the most recent quarter was down to 38 per cent, from the previous quarter’s 42 per cent, also found that 27 per cent of applications were still pending, up from 21 per cent in the previous quarter.

Isme chief executive Mark Fielding said there were “tentative signs” that the banks were releasing more funds into the SME sector, which was welcome.

However, the increase in the number of applications that were pending was a concern and banks must become more efficient in dealing with credit requests. He called on the Central Bank to investigate whether banks were temporarily disguising a reluctance to issue refusals.

He also said there continued to be a major issue with SME loans caught up in the “deserting and bust banks” and there was a danger these loans might be bundled and sold off to “vulture funds” that would be looking for “a killing” without thought for the businesses or jobs involved.

The ISME survey found that 30 per cent of initial bank decisions were made within one week, up from 18 per cent in the previous quarter. The survey had 852 respondents.