Irish banks beginning to lend to businesses

Willingness on the part of Irish banks to lend to small and medium businesses is at its highest recorded level in almost three years as demand for financing increases.

The Irish Small and Medium Business (Isme) Association yesterday welcomed the upturn in activity as an indicator of a path back toward “normal” banking. It also reported a significant decrease in the waiting times for decisions, down from five to four weeks.

Among the key findings in its Quarterly Bank Watch Survey was that 44 per cent of those seeking funding were refused, down from 52 per cent in the first quarter, the first time successful applications have accounted for the majority over a sustained period of abstemious lending.

Demand for capital from banks is now about 41 per cent, its highest level in four years. However, despite the turnaround, just 5 per cent of Isme members say they are happy with the effect of Government intervention on lending.

Chief executive Mark Fielding sounded a cautionary welcome. "We are hoping. One swallow never made a summer but it's the first good news that we have seen. We will have to see the September results to see if there is a trend emerging. Anecdotally we are hoping that banks are starting to loosen up the purse strings but we will see."

Isme believes that State intervention has played its part in the improvement, coupled with a decrease in the number of certain types of businesses that have persistently attracted rejection.

“We feel that the pressure that the Government has been putting on [banks] has started to move and what we would have regarded as less likely businesses to get loans aren’t in the market anymore because they have been refused [so often]. Retail would be the main one; they are finding it hard.”