The Business Lending Blog

SME Demand For Credit Increases

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2017 saw a major increase in the amount of SMEs looking for finance and this trend looks set to continue for 2018.

There was a growing appetite for credit among SMEs in the fourth quarter, according to research from the Irish Small to Medium Enterprise Association (ISME)

Irish businesses are in growth mode and willing to invest in themselves. This demand has seen the more traditional finance providers inundated with applications but stringent lending restrictions mean that not all businesses, even though they may be performing well, will be able to get finance. 

ISME’s Q4 Bank Watch Survey suggests that SME demand for credit increased from 38% to 42% on the last quarter. Out of the 676 respondents, 51% stated that banks are making it more difficult to access finance, even though the same figure reported being with their bank for over 20 years.

More worrying is that the average waiting time from decision to draw down is still 6 weeks with 7% of businesses reporting that they were waiting for 10 weeks or more.

It should be noted that in ISME’s Q3 Bank Watch Survey, that loan refusal rates had risen from 28% to 39%, this figure has dropped to 32% in the fourth quarter, but is still too high.

Commenting on the survey results, Neil McDonnell, CEO of ISME said:

“A denial of access can have many ramifications for businesses; it stultifies growth, development and stability. SMEs who fail to access credit from the pillar banks must demand reasons for their failure. Half of respondents stated that banks are making it more difficult to access finance. Banks attitudes towards SMEs needs to change. We are encouraging SMEs who fail to tap into other sources of finance, such as SBCI and Microfinance”.

The association has called for Government to ensure that the Strategic Banking Corporation of Ireland (SBCI) funding is properly promoted by banks and to investigate what other sources of finance could be made available to SMEs. 

Speaking about these findings from ISME, Niall Dorrian, CEO at Linked Finance said:

“This report provides yet more evidence of the need for diversification within the Irish SME lending landscape. Ireland’s business owners deserve more choice and better options when it comes to securing the funds they need to drive their businesses forward. Successive governments have worked hard to make Ireland a great place for large multinationals to do business. Now, the same level of support needs to be provided for the equally vital SME sector.”

One area not covered by the ISME report is the availability of alternative finance options. Advances in technology and greater specialisation have led to a growing number of innovative funding solutions becoming available to Irish SMEs. 

Unfortunately, Irish SMEs are still too reliant on the main banks but with P2P lending, crowdfunding, invoice discounting, asset financing, leasing, purchase order finance and cash advance solutions, the world is changing and businesses have more choice than ever before. 

If you are looking for a fast, friendly and affordable source of finance to drive your business forward, call Linked Finance today on 01 906 0300. We’d be happy to talk you through your options.