More than half the small businesses who sought bank credit in the last three months were refused, according to the latest Bank Watch survey by business group Isme.
The survey, which was conducted among 1,083 owner-managers of SMEs, shows a reduction in demand for bank credit and a continuing high refusal rate in the three months to end of May.
Some 52 per cent of businesses were declined funding, according to the survey, down from 54 per cent in the previous quarter.
Of the requests, 34 per cent were for overdrafts, or alterations to existing facilities, while 46 per cent were for term loans.
On average, the decision time has increased to just over four weeks and the wait to drawdown has increased from three to five weeks.
Some 60 per cent of respondents reported increases in bank charges imposed, while 20 per cent have suffered increased interest.
Commenting on the results, Isme chief executive Mark Fielding said SMEs are being refused bank loans and even when lucky enough to get a loan, are hit with over-stringent collateral requirements and higher interest rates.
“The acceptance, without question by Government, of sugar-coated lending figures from the banks must stop and more pressure exerted on banks to lend, based on the merits of applicants, rather than the need to reduce banks’ balance sheets,” he said.
He said the fact that 93 per cent of SMEs disbelieve the banks and 71 per cent believe that Government has had a negative or neutral impact on SME lending is an indication of the distrust of banks and the perception of the performance of the current administration in relation to this problem.
Meanwhile a survey of 350 business owners conducted by Behaviour & Attitudes for Bibby Financial Services found 61 per cent of SMEs expect sales to grow further this quarter.
Export companies are even more upbeat with eight in 10 of those that do business abroad expecting increased sales.
However, while sales were on the up, only 30 per cent of SMEs reported improved profitability.
The survey found that 37 per cent of SMEs experienced stronger trading conditions in the first quarter of 2014, compared with the previous quarter.
Ronan Horgan, managing director of Bibby Financial Services Ireland, said the results were encouraging.
“Given the potential of the SME sector to create and maintain jobs in Ireland, it’s encouraging to see tangible evidence of increased trade for the sector, particularly in export markets.”
Mr Horgan said that many Irish SMEs were suffering unnecessarily as a result of limited access to finance, bad debts and credit management – issues that are all impacting profitability.
“Access to credit continues to act as a barrier to growth and job creation for SMEs. It’s imperative that credit is flowing. Particularly at a time when export markets are strong, we need to steal a march.”
