Lack Of Credit Cripples Small Business

Lack of access to overdraft facilities or bank loans is still an issue for Ireland's small business community and continues to have a serious effect on trading and business operations.

According to the County and City Enterprise Boards' figures in their bi-annual Business and Banking Confidence survey, over a third of small businesses felt that the availability of credit has deteriorated since January 2011.

The survey includes the views of over 1,700 sole traders and small business owners throughout the Country.

These findings follow very similar figures from the January 2011 and July 2010 surveys, which also found that over a third of businesses felt that access to credit had worsened during the previous six months.

Worryingly, a greater number of respondents also felt that their business was being curtailed by bank restrictions this year, when compared to last year.

In July 2010 for example, 44% of small businesses felt that their business was being curtailed by banking restrictions, compared with 48% in July 2011. In addition, 45% of those who took part in the survey consider the effect of current banking situation on trading and business operations to be "serious".

Commenting on the findings, Vincent Reynolds from the County and City Enterprise Boards said: "Access to credit is a challenge for most businesses, but what this survey shows is that lack of access is hurting thousands of smaller businesses around the country. According to our findings, they feel that their businesses are being curtailed as a direct result of banking restrictions."

Reynolds added: "The board has an important role to play in advising and supporting small businesses, including in the areas of access to capital and credit facilities. Without access to cash flow and credit, many viable businesses are going to lose sales, customers and jobs."

As in previous surveys, there was a high level of demand reported for a small business loan scheme concept, proposed by the County and City Enterprise Boards. Nearly 7 of out 10 respondents (69%) felt that such a scheme, to provide loans of up to €20,000 to support working capital needs, would be both "helpful and desirable."

It has also emerged that small businesses are waiting longer to get paid for their goods and services. In this survey, 64% of respondents had experienced an increased level of debtor days, compared with 60% of respondents at the start of the year. Mr Reynolds remarked "At a time of significant cash flow difficulties, this increase is a worrying trend."

Meanwhile, the number of business owners who feel that the current business environment was either poor or very poor, is down from January 2011 (53% felt that the overall business environment was either 'poor' or 'very poor' in January 2011, compared with a figure of 48% in July 2011.)

The survey was carried out in July this year.

(LB/GK)