LOANS TO IRISH Small and Medium Enterprises ‘plummeted’ by 77% during the period 2007-2011, a new report by the OECD has found.
The international body pointed to lending volumes that reduced from €19.4 billion to €4.4 billion during the period, and continued to decline further in 2012, when final figures indicated just €3.6 billion was lent into the SME sector.
Importantly, the OECD has stripped out all lending to property related companies to give a more accurate picture of lending to the core SME sector.
On credit conditions, the OECD said that approval rates dropped from 76% in 2008 to 70% in 2011, but recovered to the 2008 level by the end of 2012, the most recent period for which data is available.
However, credit approval rates have consistently been the subject of criticism by small firms trade bodies, who allege that constructive dismissal or restrictive loan conditions on approval are artificially inflating approval figures.
The data in the OECD report shows that venture capital and seed capital became important sources of finance for SMEs during the teeth of the recession, although investment from these sources decreased during more recent years.
Funding from these sources climbed from €226 million in 2007 to a peak of €310 million in 2010, before falling again in 2012 to €269 million.
The report notes that SME loan shares decreased faster than total loans decreased in Ireland as well as in fellow bailout countries Portugal and Spain, and that the loans form “a smaller share of a shrinking business loan stock”.
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