Small business bank loan success drops dramatically

Fri, 28/10/2011 - 10:53 -- Editor

The success rate of small and medium sized enterprises that applied for a bank loan fell from 92 per cent in 2007 to 65 per cent in 2010, according to new figures released today.

This compared to a fall from 88 per cent to 65 per cent in the UK over the same period.

The Northern Ireland survey of Business Access to Finance is part of an EU wide survey of Small and Medium Sized Enterprises (SMEs).

The Northern Ireland survey also included coverage of the micro business population. This showed that the bank loan success rate for such businesses (0-9 employees) halved over the period (from 89 per cent  to 45 per cent  of applicants).

Commenting on the figures, Enterprise Minister Arlene Foster said: “There has been considerable concern expressed by the business community in recent years that they are not getting access to the financial support needed from banks to grow their businesses.

“Official statistics released today confirm that businesses are much less likely to have been successful in obtaining a loan or an overdraft in 2010 compared to 2007. The decline was particularly marked for the micro business population where success rates halved over the period."

The Minister concluded: “Access to finance on reasonable terms is essential to grow our way out of the current economic downturn. I would encourage the banking sector to work more closely with businesses to their mutual benefit, particularly in the high valued added export-led sector.”

The percentage of SMEs applying for finance from any source remained relatively constant over the period. In 2007, 38 per cent  of SMEs applied for finance (loan, equity or other finance including overdrafts) and in 2010 39 per cent .

Northern Ireland SMEs (42 per cent ) were more likely to indicate that the willingness of banks to provide finance (of any type) had worsened over the period, compared to their counterparts in the UK (33 per cent ). Twenty nine per cent of all Northern Ireland SMEs expect to seek a bank loan before 2013 (25 per cent  in the UK) compared to 16 per cent  who applied in 2010.