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Lending Up But Banks Dawdling

Business demand for bank credit is up and refusal rates are down, according to ISME's latest quarterly bank watch survey.

The survey, which was conducted last week, polled over 800 SME owner-managers for an assessment of the lending environment.

It found that 42% of companies that applied for funding in the last three months were refused credit by their banks. While still relatively high, ISME says that the refusal rate is a big improvement on the 52% recorded in the previous quarter.

Of the SMEs queried, 44% of respondents had requested additional or new bank facilities in the last three months, an increase from 32% in the previous quarter.

Other findings in the ISME survey showed that, of the 58% approved for funding, only 66% have drawn down the finance either fully or in part, an increase from 43% in the previous quarter.

Some 53% of requests were for term loans, with 45% for overdrafts, or alterations to existing facilities, while invoice discounting/factoring accounted for 8% of requests, with 12% requesting leasing.

Over one third of respondents (35%) had increases in bank charges imposed, while 21% have suffered increased interest.

Almost 70% of SMEs polled say that the government is having either a negative or no impact on SME lending.

While 72% are aware of the Credit Review Office and 62% know of of the Credit Guarantee Scheme, only 40% know about the Micro Finance scheme, down from 44% in previous quarter.

According to ISME CEO Mark Fielding, banks need to become more efficient at dealing with credit requests.

“Two cautionary findings are that over one fifth of all applications are still pending at time of survey and the average decision times have increased to in excess of six weeks.

“This is a long time for the potentially job-creating expansion plans of a business to sit in limbo. It is not acceptable that the bailed-out banks are delaying economic recovery through their unproductive and slow work rates.”

Fielding adds that the increase in formal applications for credit among SMEs, from 53% to 72%, is notable and promising.

“ISME has been encouraging owner-managers to make formal applications, as this greatly increases the likelihood of success. Informal applications have decreased from 83% to 71%, further proof of a shift towards the recommended formal route when approaching the bank.” (September 2014)

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