SMEs approved for credit by banks dropped significantly in the three-month period June-August, according to ISME, which expressed concern at the trend.

ISME collated the responses of 928 SME owner-managers for its latest quarterly bank watch survey and found that 45% of companies who applied for funding in the last three months were refused credit by their banks, an increase on the 33% refusal rate recorded in the previous quarter.

Mark Fielding, ISME’s CEO, said that the quarterly surveys had been noting a general improvement in lending to SMEs in the last year, but the change was a worrying sign.

“After a slow but steady improvement in credit availability over the last two years, it is hoped that these results are just a blip and that the flow of funds into the SME sector will continue,” he added.

“It is difficult to discern a reason for this slow-down, as the Strategic Banking Corporation of Ireland (SBCI) has been active in the market since March and demand for bank credit is steady.

In Association with

“However, the ISME helpline has had numerous calls from SME owners enquiring about the SBCI funds, as it seems that the message has not permeated down through the two banks’ management and staff.

“The need for proper communication and training of bank officials is still an issue with these bailed-out banks and must be improved, otherwise growth will be stalled.”

Fielding contended that delays in bank decision-making helped with lending statistics but amounted to a constructive refusal for SMEs.

“The lack of expertise at branch level is astonishing and here the Central Bank must have a role to demand better training.”

Other findings from ISMEs bank watch survey showed that 41% of respondents had required additional or new bank facilities in the last three months, compared with 45% in the previous quarter.

Some 28% of initial bank decisions were made within one week, an increase from the 15% in the previous quarter.

On average, the initial decision time has remained at just under four weeks. The wait to drawdown decreased from four weeks to three weeks.

Around 38% of respondents had increases in bank charges imposed, while 13% noted increased interest rates.

Over two-thirds of SMEs (69%) said that the government was having either a negative or no impact on SME lending.