One In Four SME Loans In Default
A new Central Bank report on the Irish SME credit market shows that lending to the sector has remained broadly static since 2011, but the rate of loan default among SMEs stood at 26% by the end of 2013.
The report assesses credit trends in the SME sector between 2011 and 2014, and notes that the balance of lending to SMEs has been falling steadily since 2011 across all major facets of the non-financial, non-real-estate economy. Lending flows to these sectors have remained between €450m and €750m per quarter over the last four years.
The rejection rate on SME credit applications fell from 30% to 20% during the four-year period, while the number of firms reporting an increase in the size of available loans also grew steadily. Loan application rates among SMEs remained between 35% and 40% from 2011 to 2014.
At the end of last year, the total amount owed by the Irish SME sector was €21bn, with an average amount owed per SME of around €70,000. Of the 26% of SMEs that were in default, the construction, hotels and restaurants sector, as well as the personal (private household) sector, accounted for most of the firms.
Among the reasons cited by SMEs for loan applications between October 2013 and March 2014, working capital was the most common (61%). Growth and expansion plans were cited as the reason in around one quarter of company credit applications.
The full Central Bank report is available here. (July 2014)