ISME claims bankers are 'lazy' and 'complacent' about long loan approval waits

ISME HAS ACCUSED bankers of taking a ‘delay till they go away’ approach when approving loans for small- and medium-sized businesses.

The association’s quarterly ‘bank watch survey’ found that SME business owners have to wait longer for decisions on loan applications.

The survey of over 1,100 small business owners found that average waiting times have increased from seven weeks for the period March to May, to eight and a half weeks from June to August.

It found that smaller businesses wait four and a half weeks for an initial decision on loan applications, with the approval time for drawdowns taking four weeks.

“The substantial increase in the length of time it is taking to get approval on a loan demonstrates a complacent and lazy attitude from bankers,” ISME chief executive Mark Fielding said.

He added that the average two and a half month wait on loan approvals “is a cause of concern and totally unsatisfactory”.

Refusal rate

The ISME study found that over a third of companies that applied for funding from June to August this year were refused credit by their banks, up slightly compared to the second quarter, but down 10 percentage points compared to the same three-month period last year.

More than half of respondents said they are concerned about bank fees and charges, with 52% saying bank charges are not fully explained.

Compared to the results from the last ‘bank watch survey’, fewer small business owners said they were aware of the Credit Review Office (CRO), the state-backed body that provides a credit appeals process for SMEs that have been refused credit by banks or had their credit lines cut.

Awareness of the micro finance scheme – the government lending initiative for startup and existing businesses – was also down, with just over half of respondents saying they know about it.

“One of the keys to economic revival and sustained recovery is a properly functioning banking system, with proper resources and well informed and trained staff,” Fielding said.

“The lack of awareness among banking staff of government financial assistance schemes, which can act as a lifeline for a business, is unacceptable.”

ISME chief executive Mark Fielding

Regulation

Earlier this year, the Central Bank of Ireland introduced new regulation requiring lenders to give more information around refusing loans to SME customers.

At the time of the rules announcement, Patricia Callan, director of the Small Firms Association, told Fora they would help SMEs improve their loan applications, suggesting they would give “consumer-like protection to SMEs”.

Mark Fielding said at the time that while he welcomed aspects of the new rules, such as the protection for guarantors, he added: “We have found that in the past the code was not publicised or promoted very much by banks, this needs to change.”

AIB, Bank of Ireland, Ulster Bank and most recently Permanent TSB are covered by the CRO.