Ray Butler (Meath West, Fine Gael)

I wish to raise the matter of high loan refusal rates and the detrimental effects they are having on small and medium enterprises, SMEs, and their vital recovery. From speaking to local business people in my constituency who are struggling to survive and pay back loans, this issue needs to be addressed in real terms. It is suggested banks are putting already pressurised businesses into further decline by withdrawing their overdraft facilities and restructuring them into term loans. This means that small businesses are now operating outside the original terms, which leads to their credit rating disappearing for anything up to six years and access to necessary funding drying up completely. Banks, on the other hand, are stating their current mechanisms for restructuring loans are helping SMEs to continue to operate, although I argue that this is clearly not the case.

Evidence appears in a recent survey carried out by the independent organisation working in support of the Irish small and medium enterprises, ISME, sector which confirms in its latest quarterly bank watch survey that the refusal rate of loans to SMEs has risen to 54% after slight improvements in the previous two quarters. It also indicates that 37% of respondents to the survey had requested additional or new bank facilities in the past three months, an increase of 6% on the figure for the same quarter in 2011. In addition, around 80% of businesses which had applied for funding outlined that banks were making it more troublesome for them to access the funding they needed to remain afloat.

In the light of the volume of SMEs in real financial trouble, the entire credit rating system needs to be reviewed if they are to be given proper opportunities and have prospects for recovery. It has been widely reported that there is a high percentage of SMEs with restructured loans on bank books and no access to further loan or overdraft facilities from banks. It is certainly time to reduce the period of credit blacklisting from six years to two as a means to improve the position for all small and medium enterprises. This would allow them time to repay their existing loans, while providing access to cash injections, if necessary, within an earlier timeframe.

We must carefully assess and address this matter by taking definitive action before it becomes too late for many SMEs which are doing their very best to keep the wolves from the door and those of their employees also. If we cannot offer them real support in these unprecedented economically turbulent times, how can we really expect the sector to survive, much less thrive?

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