The latest SME credit demand survey from the Department of Finance shows that the percentage of bank credit applications for small firms fell by four points in the year to March compared with the previous year.

Around 76% of firms stated that their reason for not seeking credit was that they had sufficient internal funds for their needs, with just 16% of firms seeking bank credit and a further 5% looking for non-bank finance.

The department said that the survey of more than 1,500 respondents, carried out by Behaviour and Attitudes, is “the most comprehensive survey ever of SME credit demand” here, and some of its key results are:

• 45% of all businesses reported increased turnover in the six months up to March 2022, with 18% reporting a decrease, a significant improvement on 2021.
• All sectors reported an improvement in turnover performance, with the biggest improvement of 66% coming in the hotel and restaurant sector.
• 61% of SMEs reported profit during 2022, compared to 53% in 2021. 10% reported a loss in 2022 while 25% broke even.
• Two-thirds of SMEs agree that investing in climate change adaptation is important.
• For 38% of SMEs, energy costs were less than 2% of cost of sales, while for 26% the energy costs were between 2-5% of cost of sales. For 9%, energy costs are more than 10% of cost of sales.
• Electricity costs are a significant proportion of total energy costs.
• 35% of SMEs have committed funds to invest in energy efficiency over the next year.

Credit demand from banks was lower, with 16% having applied for bank finance in the March 2022 period compared to 20% in March 2021. Credit demand remained unchanged at 20% among medium-sized companies, with the decline driven by micro (12%) and small businesses (18%).

The most significant decrease in credit demand was in hotels and restaurants (down from 26% to 10%) and construction (down from 26% to 19%). Demand for credit was highest for manufacturing at 22% (down one point on March 2021) and construction at 19% (down 7%).

In Association with

The average reported cost of credit on outstanding loans was 4.59%, a decrease from 4.9% in March 2021.

Of those seeking non-bank finance, 89% were approved fully, 1% partially, while 6% were refused, with 3% of applications still pending at time of interview.

Of those who applied for non-bank finance, 54% applied due to working capital requirements, with 24% applying due to a new business venture/expansion/purchase of assets or equipment. Just 2% applied due to a need to restructure current loans/credit. The most common non-bank finance requests were for new loans (35%) and leasing/hire purchase (26%).

The average value of a credit application for new finance was €353,577, quite a jump from €163,550 in March 2021. The average value of applications for renewal or restructuring of existing finance was €41,538, down a good deal from €180,260 in 2021.

The average amount of reported turnover for the year up to March 2022 (€4.29m) was 5% higher than the average amount of reported turnover for the previous year (€4.09m). This was €614,808 for micro companies (up 5%) and €3.68m for small sized enterprises (down 5%), while medium sized companies reported an average turnover of €11.81m (up 15%).

61% of all businesses reported making a profit in the six months period up to March 2022, with 10% reporting a loss. Again, this is a significant improvement compared to March 2021 and represents a continuation of the improvement recorded in the previous wave to September 2021.

The average amount of time from application to decision was 22 working days, compared to 24 in March 2021. The proportion of loans that were still pending stood at just 6% as against 7% in 2021.
 
The proportion of credit applications that were declined stood at 11% in March 2022, the same level as in March 2021. Decline rates were lowest amongst the manufacturing, construction and business services sectors. The highest rates of decline were in hotels and restaurants, at 40%.
 
Those applying for Covid-related funding needs and/or to restructure debt were more likely to have their request declined.

The full results of the bi-annual survey are available here.