The SME Credit Demand Survey covering the period October 2013 – March 2014 was published today (3 June 2014) 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 5,000 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 SMEs with 74% (up 2%) of companies surveyed responding that turnover has increased or remained stable, 23% (up 2%) responding that they have increased staff numbers, with the proportion of profit-making businesses increasing from 48% to 51% over the survey period. A strong SME sector is vital for the continuing recovery of the Irish economy and I am heartened to note that there are further signs in the survey results that confidence is growing among SMEs and their customers.
Despite the improvement in conditions, demand for credit remains low with 35% of the 1,500 SME’s surveyed applying for credit during the six month period. Importantly however, the approval rate has improved with 81% applications approved when ‘pending applications’ are removed. Small businesses that are refused credit should avail of the services of the Credit Review Office, which is overturning approximately 55% of cases referred to them.
The belief among respondents that the banks are lending to SMEs continues to grow, standing at 55%, up from 51% in September 2013 and 39% in September 2012. This is encouraging but the banks need to ensure that this belief is matched by corresponding lending to viable businesses.
I am disappointed to see such a low level of awareness of the Government supports available to small businesses. However, I am confident that the “Supporting SMEs” online tool, available on my Department’s website, will prove to be a crucial resource for SMEs seeking to utilise the State supports for which they may qualify. In addition, the Strategic Banking Corporation Ireland, recently announced by the Taoiseach, will improve the availability of credit to the SME sector. Lenders will now be able to fund loans of greater duration or more flexible cashflows with enhanced terms facilitated by the SBCI and its European funding partners.”
This survey is the 6th 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
35% of SMEs requested credit (Sep 2013: 36%). Most demand continues to be for cashflow and working capital purposes.
Decisions on credit
65% of credit applications were approved or partially approved (Sep 2013: 65%);
15% of credit applications were declined (Sep 2013: 16%);
20% of credit applications are still pending (Sep 2013: 19%).
The decline rate continues to be the highest for micro enterprises at 20% (Sep 2013: 23%).
When the pending applications are excluded, the approval/partial approval rate is 81% (Sep 2013: 80%) and 19% declines.
Reasons for not requesting credit
By far the largest proportion of respondents (82%) stated that they did not seek credit because they did not need it (Sep 2013: 78%);
The belief among respondents that the banks are lending to SMEs continues to grow, standing at 55%, up from 51% in September 2013 and 39% in September 2012.
The report finds only 26% of respondents reporting a decrease in turnover, compared with 28% in September 2013.
The number of respondents reporting an increase in staff numbers has increased to 23% from 21% of the total in September 2013.
Only 12% of SMEs said that they have reduced staff numbers in the previous 6 months. This proportion was 16% in March 2013 and 18% in September 2012.
During the period under review, there was an increase in the proportion of profit-making businesses from 48% to 51%. The number of companies reporting a loss remained steady at 18%.
Awareness of Credit Review Office
Awareness of the Credit Review Office has fallen further from 67% to 64%. It may be the case that a decrease in demand for credit has resulted in less awareness of the services of the CRO.
Awareness of Government Support Initiatives
The results of the survey show that many SMEs remain unaware of some or all of the Government supports available to small businesses. 52% of the surveyed companies are aware of the Credit Guarantee Scheme, 26% aware of the Microfinance Loan Fund, while only 6% are aware of other supports such as the NPRF funds. 41% of SMEs are unaware of any Government support initiatives. The “Supporting SMEs” online tool should go some way to addressing this knowledge deficit.
3 June, 2014
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 five reviews covered the period April 2011- September 2013. The review published today covers the period October 2013 to March 2014.
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
Read the survey report here