FINANCE
Te relationship between banks and small to medium-sized enterprises (SMEs) has been the topic of much debate over the past two years, with much of that debate being focused around present lending. Opinion is very much divided as to whether there is enough credit available for small businesses, and it really is a tale of two viewpoints. According to figures released by the Central Bank in December, some €33bn was owed to banks in SME core loans at the end of the third quarter of 2010, a figure that excluded property-related activity and financial intermedi- ary services. Felix O’Regan, head of PR and public affairs, Irish Bank-
ing Federation (IBF), says this showed the resilience of the sector as well as the ongoing support from banks for it. Central Bank figures have also shown that repayments
on SME loans have been greater than drawdowns. “Tis suggests that SMEs are themselves reducing
their level of outstanding borrowings, and this is sup- ported by anecdotal reports from within the banking sector,” says O’Regan. John Trethowan, credit reviewer, Credit Review
Office, has backed up this assertion. In the office’s second report in November 2010, he said: “We are approaching a tipping point whereby the issue is mov- ing from being a supply-side problem to a demand- side issue.” However, the Small Firms Association (SFA) has
challenged such a positive outlook. In response to the Central Bank report, it highlighted that one in four SMEs is still not getting enough credit. Avine McNally, acting director of the SFA, says
that “the decline in lending as per the findings of the Central Bank clearly shows that access to credit remains a huge challenge for many small firms”. She points to the SFA’s latest quarterly business sentiment survey, which found that 18pc of respon- dents reported a decrease in working capital avail- ability from the bank. Chartered accountant Nick Linnane says the
problem lies with the relationship between banks and their customers. Linnane has helped a number of firms to prepare for applications of loans, and many have been unsuccessful. He calls for a return to the days when banking
was based on ‘relationship’ banking, and says that while much talk has been given to its return, he’s yet to see this happen on the ground. “I sincerely wish banking would go back to that
route, when the bank manager knew the client, knew his family and knew the circumstances of the busi- ness and that business’s customers. Ten, he had a greater understanding of the business, understood the value of it and the values of its directors.” However, there are some ways to develop a rela-
tionship with your bank, according to Your Business, Your Bank, a guide published by the Credit Supply
VOL 4 ISSUE 1 2011 OWNER MANAGER 39
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