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Independent report on the demand for credit by Small and Medium Enterprises (SMEs) published by the Department of Finance

The independent survey on the demand for credit by SME’s in Ireland was published today (28th November 2012) covering the period April to September 2012. This survey was conducted by Red C and follows on from similar surveys covering the two previous six month periods. This survey is the most comprehensive survey of SME Credit Demand in Ireland covering over 1,500 respondents and over 5,000 direct calls to SME’s. The key conclusions of the Survey are set out below.

Welcoming the report for the further clarity it brings to the pattern of credit demand by the important SME sector, the Minister for Finance, Michael Noonan TD said:

"This comprehensive survey is the third in the series of SME Credit Demand Surveys and provides valuable evidence on the state of play in the SME sector in Ireland over the past 18 months. I would like to thank all of the SME’s who have participated in the survey as it is a vital resource to all stakeholders in the sector.

The SME sector is a key driver of growth and jobs in the Irish economy. While there is no doubt that the operating environment is challenging and demand remains soft, stability is returning and our economy is growing again. I hope that this will give confidence to SME’s owners and managers to invest in their businesses.

The Government have introduced a number of initiatives to support this investment including such as Microfinance Loan Fund and the Temporary Partial Credit Guarantee Scheme. However, the banks have a key role to play and they must support investment by SME’s and provide credit to viable companies. Lending targets of €3.5 billion in 2012 and €4 billion in 2013 have been set for both AIB and Bank of Ireland and I am pleased to see some encouraging signs in relation to applications and approvals in today’s survey.

I would encourage all SME’s who require credit to approach the banks with viable business plans and if refused they should avail of the services of the Credit Review Office, which is overturning approximately 55% of cases referred to them."

Key Conclusions of the Report

Demand for Credit

39% of SMEs requested credit

61% did not request credit

Most demand was for cash flow and working capital purposes.

Reasons for not requesting credit

79% did not need it or have sufficient internal reserves/funds

6% thought or believe the banks are not lending

Decisions on credit

60% of credit applications were approved or partially approved

19% of credit applications were declined and

21% of credit applications are still pending

When the pending applications are excluded, the approval rate is 76% and 24% declines.


78% of SMEs who were refused credit did not agree with the reason provided by the bank for the refusal.

In 69% of cases where formal applications were declined, the bank did not inform the borrower of the right to internal review.

Employment Trends

18% of companies surveyed indicated they had decreased employee numbers in the period, a fall of 2% from the previous survey.

Profit Trends

73% of enterprises reported they had made a profit or achieved a break even position in the six months to September 2012.

Awareness of Credit Support

77% of SMEs were aware of the existence of the Credit Review Office, while 65% were aware of the Code of Conduct for Business Lending to SMEs.

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 review covered the period April-September 2011. A second review covered the six month period from October 2011 to March 2012. The review published today covers the period April to September 2012. The review was undertaken by Red C whereas the previous two were undertaken by Mazars. The Department held a tender competition in which Red C were successful this time round.

The review 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