Banks giving marginally more loans to SME sector

THE banks are approving more loans for small businesses, but with more strings attached than before, a new report has found.

The survey for the Department of Finance shows the rate of SME loans being approved in full rose to 59pc in the six months to the end of March compared with 56pc last September.

Despite that increase, borrowers said their banks were adding more and more conditions to their credit application.

Half of those surveyed reported being asked for personal guarantees, an increase of 9pc since September, while the rate of businesses who were required to maintain their account with the bank almost doubled to 31pc.

Other conditions such as putting forward a specific asset as security, or providing facility fees also increased.

The survey, which was carried out by Red C, is the latest report commissioned by the Government to assess the state of SME lending in the country.

The report found that overall, 76pc of loan applications were at least partially approved, up from 70pc last September.


Anecdotal evidence for months has shown that business people perceive the banks are not lending and therefore have not applied for credit on the assumption they will be turned down. That appears to be beginning to change now.

Some 47pc of those who took part in the poll believed the likes of AIB and Bank of Ireland are willing to do business with at least a small number of SMEs, up from 39pc the last time the survey was carried out.

About 40pc of SMEs applied for credit between September and March – up 1pc in six months.

The report came as research from the ratings agency Standard & Poor’s warned that medium-sized firms face the toughest time in trying to refinance debts. The report claims about €3.5trn worth of debt is due to be rolled over in the next five years.

“Deleveraging and tightening regulation are creating a scarcity of finance for European companies, and the problem is particularly acute for medium-sized businesses,” S&P said. This sector of mid-cap companies represents a “squeezed middle”, it added.