SFA Quarterly Banking Survey 2014 reveals:

• 31% believe bank’s relationship with business has disimproved
• Cost of finance increasing
• T&Cs, Collateral and Delays major cause for concern

The Chairman of the Small Firms Association, AJ Noonan, addressing the Irish Banking Federation this morning, stated that “I have never known a Business Big or Small to be Successful without a Bank supporting them!”   Irish SMEs rely heavily on banks as a source of external finance which makes them vulnerable to developments in the banking sector.”  55% of respondents to the SFA’s Q1 2014 Banking Survey stated that they use commercial banks for their working capital requirements, whilst 40% rely on them for their investment capital needs.  

Mr Noonan commented “For Irish SMEs, supply of finance is second only to finding more customers as the most pressing issue we are facing.  Therefore it is essential that the Government works to deliver a greater diversity of funding such as direct government funding, peer-to-peer lending platforms, business angels and venture capital.”

31% of survey respondents stated that their relationship with their business bank had disimproved over the past year, with 41% stating that it had stayed the same and 10% stating that it had improved (18% did not state).  The SFA Chairman, Mr Noonan noted “The great majority of our members feel that the “relationship” is missing from the “relationship manager” title and that they want a dedicated person to contact, who understands their business, communicates effectively and responds quickly.  The biggest issues they are facing are inoperable terms and conditions, increased collateral required to secure finance and delays in securing credit and investment finance.”

In relation to the availability of finance from commercial banks, 38% stated that they do not need investment capital at present and 28% do not need working capital.  12% of companies stated that the availability of investment capital had decreased over the past year, with 19% reporting a decrease in availability of working capital.  Just 8% reported an increase in availability of investment capital whilst 7% reported an increase in availability of working capital.

“The cost of finance is clearly increasing, with 29% reporting an increased cost for working capital over the past year and 25% for investment capital, compared with just 4% experiencing a decrease in cost for working capital and 3% for investment capital”, commented Mr Noonan. “Irish interest rates are well above competitor economies such as Germany, which dampens our members’ international competitiveness.”

Mr Noonan further stated: “Trust has been broken in dealing with commercial banks; hence the difficulties in small businesses accessing EU Financial Instruments as these must be channelled through intermediaries which are the commercial banks in Ireland. 

We have called time and again for the introduction of a State Investment Bank which would have as its remit job creation and infrastructure provision.  This must now be delivered.  We would also welcome new overseas banks to come into the market to give businesses a choice.”

Mr Noonan concluded “SFA members have increasingly been raising the issue of the lack of competition in the banking sector, increased charges and extra conditions as becoming increasing barriers for even growth oriented small businesses.  This is completely unsatisfactory and there is a need for increased transparency around banking products and greater competition in the marketplace.  The SFA has called on the National Consumer Agency to undertake and publish a price survey on the range of business banking products, to improve price transparency for small businesses on an on-going basis, and this should now be actioned.”

AJ Noonan,
SFA Chairman,
Small Firms Association,
84/86 Lower Baggot Street,
Dublin 2.
T: 01 605 1500
E: info@sfa.ie