merrion street

The Department of Finance has today published the latest in its series on SME Credit Demand Surveys which covers the period October 2015 to March 2016. 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 to an in-depth discussion. The survey covers all the various sizes of SMEs be they Micro Enterprises, small enterprises or medium sized enterprises.

Some of the key findings of the survey include:
85% of SMEs reported a stable/increased trading performance, this is stable since the last such survey that covered the period April 2015 to September 2015.
During the period of this survey October 2015 to March 2016 some 26% of SMEs requested credit and within that 89% of completed credit applications were approved or partially approved, this approval rate is an increase of 4% on the previous period.
Of those who did not request credit 84% of SMEs stated that they did not seek credit because they did not need it. This represents a 5% improvement on the previous survey.
23% of respondents believe that the banks are lending to SMEs and only 1% of SMEs did not request credit because they felt it was too expensive to borrow.

The Minister for Finance, Michael Noonan T.D. today welcomed the positive results of this most recent survey, saying:
“I would like to express my sincere thanks to each of the Small and Medium sized Enterprises who participated in the survey. Their time and effort in helping us to assess the state of affairs in SME lending is an invaluable resource and this helps all stakeholders in the sector. The continued cooperation with the survey helps us to refine and broaden policy responses to the needs of our important indigenous business community.”
“The results of this latest survey show that SMEs are reflecting the wider economy as trading conditions at home improve. I am heartened to see the strong and growing awareness of supports the Government has put in place to assist Ireland’s SMEs who are a key engine for employment generation. The Programme for a Partnership Government will continue that strong support for Ireland’s home-grown employers and entrepreneurs. ”

ENDS
10 June 2016
Further information from:
David Byrne - Press Officer - pressoffice@finance.gov.ie - 086 026 7978

Notes for editors
Background to the series of SME Credit Demand Surveys
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 nine reviews covered the period April 2011- September 2015. The review published today covers the period October 2015 to March 2016.
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 and previous reports are available on the Department of Finance website at www.finance.gov.ie
Key Findings of the Report
Demand for credit

26% of SMEs requested credit (Sept 15: 30%). The decline is mainly driven by medium-sized companies. The survey suggests that the decline in credit demand can be explained by 2 factors:

Medium-sized companies have consistently enjoyed the most favourable trading conditions and profitability of all SMEs. They are therefore in a better position to finance their own growth.
Decline in demand is a function of a decline in business sentiment due to market uncertainty.

In addition, the survey indicates that the mind-set of SMEs remains focused on stabilisation and moderate growth of the business post-recession rather than pursuing significant investment opportunities.

Decisions on credit

80% of credit applications were approved or partially approved (Sept 15: 73%), 10% of credit applications were declined (Sept 15: 12%) and 10% of credit applications are still pending (Sept 15: 15%).

The decline rate continues to be the highest for micro enterprises at 15% (Sept 15: 15%).

When the pending applications are excluded, the approval/partial approval rate is 89% (Sept 15: 85%) with 11% declines.

Reasons for not requesting credit

84% of SMEs stated that they did not seek credit because they did not need it (Sept 15: 79%).

Only 1% of SMEs report that they did not request credit because they felt it was too expensive to borrow.

15% did not apply for bank finance due to having an existing finance product in place. This is up significantly from just 6% in September 2015.

3% have not applied for credit due to fear of possible rejection (Sept 15: 4%) while 3% have not applied as they believe the banks are not lending (sept 15: 2%).

Banks

Looking at the banks' behaviour as illustrated by the report, 80% (Sept 15: 77%) of SMEs who were refused credit did not agree with the reason provided by the bank for the refusal is high.

In 30% (Sept 15: 27%) of cases where applications were declined, the company said that the bank informed the borrower of the right to an internal review.


Awareness of Credit Review Office

64% of those applicants who were refused bank finance by the two pillar banks said that they were not informed of their right to a decision review by the Credit Review Office. This is up from 53% in September 2015.

Awareness of Government Support Initiatives

Looking at state funded support, awareness is highest for Enterprise Ireland (79%) followed by Local Enterprise Offices (58%).

38% of SMEs are aware of the Credit Guarantee Scheme (Sept 15: 35%) while 30% are aware of the Micro Finance Loan Fund (unchanged). Awareness of the Supporting SMEs Online Tool is also unchanged at 26%.

Awareness of the Strategic Banking Cooperation of Ireland (SBCI) is 24% – up 1% since September 2015.