As the Deputy is aware, small and medium sized businesses, including those in the hotel and catering industry, play a central role in the sustainable recovery of the Irish economy. To support economic recovery, Government policy is focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources.
In terms of monitoring the requirements for SMEs, my Department commissions biannual surveys to ascertain the demand for credit by SMEs. This survey series, currently being conducted by Red C, is the most comprehensive survey of SME credit demand in Ireland, covering 1,500 respondents and involving over 6,000 direct telephone calls to SMEs. SMEs of all sizes trading in all sectors, excluding property development and speculative activities, are included. The survey covers demand for credit from both bank and non-bank sources.
I would draw the Deputy's attention to the most recently published Department of Finance SME Credit Demand Survey covering the October 2015 to March 2016, which can be found at www.finance.gov.ie. The results of this survey show that, when pending applications are excluded, 89% of credit applications to banks were approved or partially approved (up 4% from the previous survey). Working capital requirements were provided as the main reason for applying for bank finance with 39% of respondents stating that they required finance for working capital (down 9%). When asked about sources of finance for working capital, internal funds/retained earnings were the main finance source of working capital with 67% of working capital coming from this source (up 4%). The survey also showed continued positive trends in terms of trading performance, profitability and employment.
My Department has also been involved in a range of initiatives to encourage access to credit for small and medium sized businesses. The SME State Bodies Group provides a forum for the development and implementation of policy measures to enhance SMEs' access to a stable and appropriate supply of finance.
Some of the main policies introduced to encourage access to credit for small and medium businesses include:
- The Supporting SMEs Online Tool, a cross-government initiative, was launched in May 2014. On answering 8 simple questions, the small business will receive a list of available Government supports. The Supporting SMEs Online Tool is available at www.supportingsmes.ie.
- The Strategic Banking Corporation of Ireland has been established as a means of ensuring that SMEs are provided with sufficient finance for growth. The Strategic Banking Corporation of Ireland (SBCI) is an initiative designed to increase the availability of funding to SMEs at a lower cost and on more flexible terms than have recently been available on the Irish Market. The SBCI does not lend directly to SMEs. It uses a network of lending partners known as 'on lenders' to make its funds available to SMEs. More information on the SBCI can be found on www.sbci.gov.ie.
- The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial Government guarantee to banks against losses on qualifying loans to eligible SMEs.
- The Microenterprise Loan Fund, administered by Microfinance Ireland, provides support in the form of loans for up to €25,000, available to start-up, newly established, or growing micro enterprises employing less than 10 people, with viable business propositions. Microfinance Ireland works in partnership with the Local Enterprise Offices nationally to administer this fund (www.microfinanceireland.ie).
- The Credit Review Office helps SME or Farm borrowers who have had an application for credit of up to €3 million declined or reduced by the main banks, and who feel that they have a viable business proposition. They also examine cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment. This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Reviewer and his team have overturned more than 50% of the refusals that have been appealed to the Office. Further details are available at www.creditreview.ie.
The Government remains committed to the SME sector, as reflected in the recently published Programme for a Partnership Government, and sees it as a key engine of ongoing economic growth. Consequently my Department and the Credit Review Office, working with the other relevant Departments and Agencies, will continue to monitor the availability of both bank and non-bank credit on both a macro and sectoral basis in order to ensure that sufficient access to finance is available to facilitate participants in the SME sector to reach their full potential in terms of growth and employment generation. This work will be particularly important in light of the outcome of the UK referendum on membership of the EU.
