The SME Credit Demand Survey covering the period April – September 2013 was published today (3rd December 2013) on www.finance.gov.ie. This survey series, currently being conducted by Red C on behalf of the Department of Finance, is the most comprehensive survey of SME Credit Demand in Ireland, covering 1,500 respondents and involving over 5,300 direct calls to SMEs. The key conclusions of the survey are set out below.
Commenting on the survey the Minister for Finance Mr. Michael Noonan TD said:
“The results of this comprehensive survey show that trading conditions are improving for Irish SME’s with 72% (up 10%) of companies surveyed responding that turnover has increased or remained stable, 21% (up7%) responding that they have increased staff numbers with the proportion of profit-making businesses increasing from 40% to 48% over the survey period. The SME sector is a key driver of growth and jobs across the Irish economy and there are signs in the survey results that confidence is growing among SME’s and their customers. The Government will continue to target initiatives at SME’s to support upward trend in economic activity.
Despite the improvement in conditions, demand for Credit remains low with less than two in five (36%) of the 1,500 SME’s surveyed applying for credit during the six month period. Importantly however, the approval rate has improved with four out of every five applications approved when ‘pending applications’ are removed. The survey also shows that there is still room for improvement in both the terms and conditions and the turnaround times for loan assessment. My Department will take up with these issue with the banks and relevant stakeholders, including the Credit Review Office.
Small businesses that require credit should not be reticent in approaching the banks and viable businesses plans in the context of a recovering economy should provide the strong support necessary for their applications for credit. If refused credit, SMEs should avail of the services of the Credit Review Office, which is overturning approximately 55% of cases referred to them.”
This survey is the 5th survey in this series and provides clarity on the state of play in the SME sector. I would like to thank all of the SMEs who have participated in the survey as it is a vital resource to all stakeholders in the sector.”
Key Conclusions of the Report
Demand for Credit
Credit demand from the SME sector has decreased this period. Overall 36% of SMEs have requested at least one type of bank finance in the period April to September 2013, a decline of 4% on the previous period. This is a return to levels of demand last seen in September 2011.
Changing perception that banks are lending to SMEs
After significant improvements in the perception of bank lending in the previous wave, we see further gains in this perception, with more than half of all SMEs 51% now agreeing that the banks are lending. This is up from 47% in March 2013 and 39% in September 2012.
Decisions on credit
Excluding pending applications, 80% of application requests were granted.
The overall decline rate stands at 20%, which is a significant improvement vs. the previous period 24%. In total 80% of applications are now approved either in full or partially, an increase of 4% since the previous wave.
Banks
73% those SMEs who have been declined bank finance disagree with the reasons given for the refusal. This is however down slightly for the fourth period in a row compared to March 2013 77%, September 2012 78% and March 2012 81%.
Critically there has been a significant improvement in the proportion of declined applicants who have been informed of a reason for the decline. Those claiming to have not been given a reason for the decline in credit now stands at 10%, down 11% on the previous period and 14% year on year.
Only 5% of SMEs surveyed believe the banks are not lending and did not apply for credit.
Trading
72% of SMEs have seen an increase or no change in their turnover of the business in the last six months; this is an increase of 10% on the previous six months survey. 34% on SMEs report an increase in turnover which is a 9% increase on the last six months while 38% have seen no change in their turnover.
Employment Trends
21% of SMEs have increased staff numbers in the past 6 months – this is up from 14% in March 2013 and 17% a year ago. We also see less SMEs having reduced staff numbers in the past 6 months 12% – down from 16% in March 2013. This means that, for the first time in the credit demand tracking survey series, we see more SMEs having increased staff numbers than SMEs decreasing staff numbers.
Awareness of Credit Support
67% of SMEs were aware of the existence of the Credit Review Office, while 51% are currently aware of the Credit Guarantee Scheme while only 25% are aware of the Micro Finance Loan Fund. SMEs feel that they do not know enough about state funded support available with only 23% of the SMEs agreeing with the statement “I have a good knowledge of state funded support available”. The majority 73% of SMEs would like to see more information on how businesses can apply for state funded support.
Ends
3 December, 2013
Background notes for editors
Bank of Ireland and AIB agreed in July 2011 to fund an independent review on credit demand by SMEs, which was commissioned by the Department of Finance following a public tender competition. The first four reviews covered the period April 2011- March 2013. The review published today covers the period April to September 2013.
The review, carried out by Red C, examined the demand for credit through a telephone survey covering over 1,500 businesses. The survey was of high quality, drew a carefully constructed sample from a large database of SMEs, made repeated calls to ensure a full response and asked factual questions. The full questionnaire is included in the report.
The report is available on the Department of Finance website at www.finance.gov.ie