Claims by banks that they are helping small to medium businesses by offering loans specifically designed to their needs are nothing more than PR stunts, the head of ISME has claimed.
Mark Fielding was commenting on details of the ISME Bank Watch Survey, issued by the association, which confirm that banks are continuing to restrict lending to the Irish SME sector, with the majority of companies (58 per cent ) being refused credit facilities in the last quarter.
The results indicate that the situation is deteriorating and that the blame lies firmly with “errant bankers and their selfish lending policies”. The association demanded that Government stop pussyfooting around with the banks and force them into freeing up badly needed credit.
The results of the survey, which attracted over 400 responses, provide a strong indication of the current lending environment for SMEs. For instance: 58 per cent of companies who applied were refused credit by their banks, an increase from the 48 per cent in the Bank Watch survey of February 2009. Overall, 62 per cent of companies found the banks to be ‘unhelpful’ in their request for acquiring finance, 83 per cent of companies outlined that the banks are making it more difficult for SMEs to access finance, 54 per cent of respondents have been with their banks for 10 years or more.
According to ISME chief executive Mark Fielding, contrary to public statements issued by the banks, there is clear evidence that they are making it as difficult as possible for business customers to access badly needed credit, with serious ramifications for those concerned.
“The duplicity of the banks is self evident and, if left unchallenged, will lead to a huge increase in company closures with thousands of additional job losses.
“Sound profitable businesses, which require credit facilities, are among the companies being refused. The result is that companies either have to put plans on hold or are faced with increased cash flow problems, which in many cases is threatening the viability of the businesses concerned.
“Over the last number of months the main banks have introduced new lending schemes ‘specifically targeted at SMEs’. Ironically, with the securing of badly needed EIB funding, the situation for SMEs is worse than ever. It is obvious therefore that the banks ‘initiatives’ are nothing more than PR stunts, in an effort to give the impression that they are open for business, whereas in fact the opposite is the case,” continued Fielding.
“Surely it is not too much to ask that the recapitalised banks immediately provide lending facilities at affordable terms to hard pressed but viable businesses. The banks can no longer ignore the greater good of the economy. The Government, who have bailed them out, must insist on the resumption of credit lines to small and medium businesses. The introduction of a Government guarantee scheme, similar to that introduced in the UK, would also help in the current crisis. Should the situation be allowed to continue, business activity will deteriorate, creating a vicious cycle of funding deficiencies leading to company closures and job losses,” he warned.
