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LENDING TO SMALL businesses is finally on the up, but the bailed-out banks are being warned against standing in the way of cash-strapped owner-managers.
The latest stats from the Central Bank of Ireland show a small boost in the amount of new loans being handed out to small and medium enterprises (SMEs) this year.
The figures for the first six month of the year have tallied to €1.2 billion, compared to about €1 billion at the start of 2013.
Agriculture was the biggest driver of new lending in the most recent quarter, followed by the wholesale and retail sector, and transport and storage businesses.
Dragging the figures down was the share of fresh loans going to property investors and developers, who were granted only €71 million in new credit so far this year – down from the €359 million the sector drew up over the same period in 2011.
Banks coming to party
Irish Small and Medium Enterprise Association (ISME) chief executive Mark Fielding said the organisation hoped the “bailed-out banks” were finally returning to normal lending habits for viable businesses.
However, the one ‘fly in the ointment’ is the delays by the bailed-out banks in making decisions, which must be improved immediately, as hold-ups of over six weeks, due to incompetent bankers can delay the growth plans of business,” he said.
ISME’s latest bank survey revealed there had been increased demand for lending and a lower refusal rate.
Debts are down
Meanwhile, the total credit advanced to Irish small and medium enterprises (SMEs) is at its lowest ebb since early 2011.
SME borrowing stood at €61.4 billion after the June quarter, down from €73.8 billion in December 2011.
Money lent to small property investors or developers made up the biggest share, €26.1 billion, followed by €11.4 billion of credit advanced to businesses in the financial sector.
€160 billion and falling
Total credit taken out by Irish private-sector enterprises was €160 billion at the end of the latest quarter, down from €220 billion at the end of March 2012.
Financial intermediaries owed €85 billion, more than half the full figure, while property investors and developers had €40 billion in outstanding loans.
Money in the bank
Deposits from all non-financial, private-sector businesses hit €41.7 billion, up from €35 billion in March 2012.
But total deposits including the financial sector were down to €88.1 billion from a peak of €95.2 billion in December last year.
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Current structures in place are ridiculous – the personal service is completely gone from the Bank Manager yet it’s not his/her fault. The time of having an open and honest discussion with your Bank Manager about your objectives and requirements are gone, the computer says NO mentality is alive and well in the Banking sector from the men upstairs and it’s not how business should be done with your bank.
Crowd funding all the way. F**k the banks
A useful exercise for Ireland’s last two main banks left standing would be for Management in each to analyse a sample of their larger SME customers’ Trade Debtor and Trade Creditor listings.
The purpose: to examine whether some form of netting off of balances internally can be done, by advance agreement with all parties, to loosen things up a little.
If firms can’t pay suppliers within credit terms because they in turn can’t get monies in on time from own customers, the whole system of credit becomes clogged up.
With this suggested once-off fix, banks won’t lose out and inefficient and very low-margin firms will be found out, but at least participating firms’ precise financial positions will become clearer, as some Accounts receivables are realised and some Accounts payables actually get paid off.
Days of easy credit from all quarters for biz are probably gone forever, so Ireland now needs many more street-wise entrepreneurs who know and understand the numbers /margins, and the importance of a solid capital structure for their business from the outset, made up of the correct mix of equity (owners risk capital), short and long-term debt as appropriate.
Banks are unlikely to ever again provide as much credit to start-up firms with just €2 of paid-up share capital on their Balance Sheets, like they did in the old days.
100% right!, but what you are suggesting would require some creativity in the banking sector. The sooner the better SME’s get access to funding, without the myriad of red tape and delayed responses the better.
This initiative will come from a foreign banks and crowd funding and our inherent dinosaurs will follow but never lead. They are too well fed.
New Budwieser ads, too much, I’ll get my “news” elsewhere now
Its free what do you expect. Good luck and shut the door after you.
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