November 2016 SME Credit Demand Survey MAIN CONTACTS: Ian McShane Executive Chairman [email protected] Luke Reaper Managing Director [email protected] Behaviour & Attitudes, Milltown House Mount St. Annes Milltown Dublin 6 Telephone: 01 - 2057500 J.7710
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November 2016
SME Credit Demand Survey
MAIN CONTACTS:
Ian McShane
Executive Chairman
Luke Reaper
Managing Director
Behaviour & Attitudes,
Milltown House
Mount St. Annes
Milltown
Dublin 6
Telephone: 01 - 2057500
J.7710
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Contents 1. Summary of main findings ..................................................................... 3
1. Summary .............................................................................................. 5
1.1 Trading Performance ............................................................................ 5
1.2 Demand for Banking Finance ................................................................. 6
1.3 The Application Process ........................................................................ 7
1.4 Non Banking Finance ............................................................................ 8
1.5 Credit Support Awareness ..................................................................... 8
2. Introduction ......................................................................................... 10
2.1 Economic Context .............................................................................. 10
2.2 Government Support Measures ............................................................ 12
2.3 Rationale for this Demand Study .......................................................... 15
2.4 Study Scope ...................................................................................... 15
3. Methodology ........................................................................................ 18
3.1 Sample Selection ............................................................................... 18
3.2 Sample Accuracy ............................................................................... 18
3.3 Collection of Data ............................................................................... 18
3.4 Comparative Results........................................................................... 19
3.5 Sample Size ...................................................................................... 19
3.6 Limitations ........................................................................................ 20
3.7 Other Research .................................................................................. 20
3.8 Privacy of the Respondent ................................................................... 20
4. Profile of Respondents ......................................................................... 22
4.1 Company Size, Turnover & Length of Time in Business ........................... 22
4.2 Exporting Companies .......................................................................... 23
4.3 Innovation ........................................................................................ 26
4.4 Regular Financial Management Tasks & Use of Financial Advisors ............. 27
5. Trading Performance ............................................................................ 28
5.1 Turnover Trends ................................................................................ 28
5.2 Employment Trends ........................................................................... 34
5.3 Profit Trends ..................................................................................... 36
5.4 Overall Trading Trends ....................................................................... 37
5.5 Business Sentiment – Next 6 Months .................................................... 39
6 Demand for Banking Finance ................................................................ 41
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6.1 Current Demand for Credit .................................................................. 41
6.2 Future Demand for Credit ................................................................... 43
6.3 Reasons for Not Seeking Credit ............................................................ 44
6.4 Demand for Credit by Product ................................................................. 46
6.5 Demand for Credit by Sector ............................................................... 48
6.6 Demand for Credit by Turnover and Profit Performance........................... 49
6.7 Cost of Credit .................................................................................... 50
6.8 Financial Position of Businesses ........................................................... 51
6.9 Seasonality of Demand and credit ........................................................ 55
7 The Application Process ....................................................................... 56
7.1 Nature of Demand .............................................................................. 56
7.2 Formal Applications for Credit .............................................................. 57
7.3 Economic Value of Credit Applications ................................................... 59
7.4 Collateral Required for Credit Applications ............................................. 61
7.5 Turnaround Time on Decisions ............................................................. 62
7.6 Decline Rate ...................................................................................... 64
7.7 Criteria, Conditions and Interest Rates Attached to Approved Applications 71
7.8 Reasons for Decline ............................................................................ 72
7.9 SME Opinions on Reasons for Decline ................................................... 73
8 Non-Banking Finance ........................................................................... 77
8.1 Enquiries for Non-Bank Finance ............................................................... 77
8.2 Decisions Made on Non-Bank Finance Applications ..................................... 78
8.3 Reasons for Not Applying for Government Financial Support ....................... 79
8.5 Financing the Business ........................................................................... 83
9 SME Awareness of Credit Supports ....................................................... 85
9.1 Credit Review Office ............................................................................... 85
9.2 The Perception of Banks Lending to Irish SMEs .......................................... 86
Appendix: The SME Demand Survey Questionnaire .................................... 88
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1. Summary of main findings
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1. Summary
The following is the summary of results from the SME Credit Demand Survey. All interviews
were conducted between 10th October and 3rd November 2016 and covered the period from
April to September 2016. Throughout the report, the most recent wave of findings (referred
to as Sept ’16) is compared with corresponding waves from previous years. This ensures that
historical comparisons are being made on a like-for-like basis, taking any seasonal issues into
account.
1.1 Trading Performance
Trading conditions for this most recent period remain favourable, and very much on a par
with those prevailing during the same period in 2015 and 2014.
In terms of turnover, just under half (46%) of all businesses surveyed report increased
turnover in the past six months, with just 12% reporting a decrease. Of those reporting
increased turnover, the average percentage increase is 15%.
Most sectors do not see any significant year-on-year change in trading conditions, although
the hotels and restaurants sector, along with the construction sector, have experienced the
most pronounced improvements in turnover. A slowdown in growth of turnover amongst
exporting businesses has, meanwhile, been counterbalanced by a corresponding increase in
growth amongst non-exporting companies.
The proportion of companies increasing their staff numbers stands at 29% in this most recent
wave of interviewing, compared with just 7% of companies which have decreased their head
count. This rate of staff increase is very much on a par with those registered in both
September 2014 and September 2015.
For the fourth year in a row, we have seen an increase in the reported number of companies
making a profit with a net profit versus loss balance of +56% in March 2016, +51% in
September 2015, +43% in September 2014 and +30% in September 2013.
In terms of overall trading trends, a higher proportion of companies than ever (67%) are
pursuing some form of growth strategy, albeit with the majority of these focusing on
stabilising the business while pursuing smaller growth opportunities.
While business sentiment with regard to the next six months remains in positive territory,
confidence has declined from 58% of companies in September 2015 expecting the business
climate to improve in the next six months, to just 48% this year.
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1.2 Demand for Banking Finance
Credit demand from banks continues to decline year-on-year, with 23% having applied for
bank finance in the past six months compared to 30% in September 2015. This decline in
credit demand is consistent across SMEs of all sizes, and should be interpreted within the
context of improved business performance and profitability in the past six months.
The survey also registers a decline in expected future demand for credit, with one in five SMEs
expecting to apply for finance in the next six months, down from 27% during the
corresponding period in 2015. This decline in expected future demand is driven more so by
small and medium sized SMEs.
The main stated reasons for not having sought credit in the past six months are dominated
by a simple lack of credit requirements, a reason cited by 86% of businesses not seeking
credit.
Of the minority of companies which had requested bank finance in the previous six months,
new loans, leasing or hire purchase and renewal/restructuring of existing overdraft and new
overdrafts were the main bank finance products requested.
The most significant decline in credit demand is from the hotel and restaurant, and
manufacturing sectors, although the wholesale/retail trade and repair sector has also
witnessed a nine percentage point drop in demand for credit compared with the same period
in 2015.
Further analysis indicates that a positive business performance in terms of turnover and profit
can impact negatively on credit demand as companies rely on their own earnings to finance
the workings of their operation.
Almost half of all SMEs with outstanding loans are not certain of the interest rate attached to
their outstanding loans. Of those who are aware, the average cost of credit on outstanding
loans is 3.2% - a decline from 4.7% in September 2015 and 4.0% in September 2014.
Just 14% report that the number of days in which customers pay them for their services has
increased over the past six months, a percentage which has declined marginally from 17% in
September 2015. There have been no changes in relation to the average number of days it
takes these businesses to pay their own suppliers compared with the last two years.
Just 2% of SMEs report having missed repayments of their loans in the past six months, down
from 4% in both September 2014 and September 2015.
Similarly, just 3% have made adjustments to their bank debt in the past six months, with the
main types of adjustments made by this small cohort centring around repayment scheduling,
and term or interest rate reduction. The proportion of SMEs suggesting that their turnover
levels are seasonal continues to decline and stands at 46% of all companies this wave. This
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has a related effect on credit demand, with 56% of all businesses reporting seasonality of
turnover also suggesting seasonal credit demand.
1.3 The Application Process
Less than a quarter of all SMEs have requested bank finance in the past six months – down
from 30% during the same period last year.
Of those companies who have requested bank finance, business expansion, working capital
and the purchase, replacement or lease of new equipment are the main uses to which this
finance was put.
Of those who sought banking finance, 79% formally applied for it – similar levels to those
recorded in September 2014 and September 2015. The main reasons given for submitting an
informal request is that the business felt there was no need, as it related to a repeat loan or
was linked with a personal relationship in the bank.
The proportion of companies who applied for finance with one of the pillar banks continues to
decline – from 84% of all those requesting bank finance this time last year to 75% this year.
The average value of credit applied for was €104,680 this year, down from €309,000 in March
2016 and €478,000 in September 2016. Of those applying for bank finance, 44% had to
provide some type of collateral, with the main collateral type required being buildings, land,
or personal assets of the owner. The average value of collateral required as a percentage of
loan is 47% - lower than the corresponding 68% registered in September 2015.
68% of all finance applications were processed within the stipulated 15 working days of receipt
of all information from the company, similar to the 65% reported over the same period in
2015.
The average amount of time from application to decision increased from 19 working days in
September 2015 to 25 working days in September 2016. The proportion of loans that are still
pending has meanwhile dropped from 15% this time last year to 9% now.
The proportion of credit applications declined stands at 15% in this survey, up marginally
from 12% during the same period last year. Overall, 76% of all SME credit applications were
fully or partially approved at the time of surveying. Decline rates are highest amongst the
construction and business services sectors, and are similar for export and non-export
businesses.
Those applying for credit for working capital are also more likely to have their request declined
than are those looking to use the credit for Capital Investment.
Main stated reasons for credit decline remain centred on applicant controlled factors,
particularly account performance/history. Just 9% of all companies who have been declined
bank finance agree with the reasons given for their refusal, a decline from a corresponding
figure of 21% in September 2015, and 16% in September 2014.
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Last year just 27% of those refused credit reported that they were informed of their right to
an internal review. This figure has increased to 47% of all SMEs refused credit in 2016,
although it should be noted that this calculation is based on a very small base size of just 53
respondents.
Excluding don’t knows, which have been increasing over the past three years, an increased
number of companies refused credit from the two pillar banks said that they were informed
of their right to a decision review by the Credit Review Office (43% this year, up from 27%
last year).
Almost two-thirds (63%) of SMEs whose credit applications were approved have availed of all
of the facility, a further 12% have availed of part of it, with one in four not yet having availed
of it.
1.4 Non-Bank Finance
The proportion of companies making enquiries for non-bank finance has been steadily
decreasing since September 2012 and now stands at just 8% of SMEs. The main types of
non-bank finance requested were for Government support, and loans from family, friends or
colleagues.
60% of these requests for non-bank finance were either fully or partially successful,
representing an increase from 53% in September 2015.
The decline rates for such requests are 16%, a figure which is down from 21% in September
2015.
Of those companies who have not applied for Government financial support, the main reasons
given were a lack of need for such finance (69%), and a lack of awareness of such sources of
funding (11%).
A majority of SMEs are aware of Enterprise Ireland (EI) (86%), and Local Enterprise Offices
(67%) Government support initiatives.
A minority (40%) of SMEs are aware of the Credit Guarantee Scheme, although this
represents an increase of five percentage points year-on-year. There continues to be a strong
appetite for State support, with almost three-quarters (72%) of all SMEs indicating they would
like to see more information on how businesses could apply for State funded support.
Internal funds/retained earnings represent the primary source of working capital finance, with
73% indicating this is so (an increase of ten percentage points since 2015).
1.5 Credit Support Awareness
Finally, when prompted, 64% of SMEs claim they are aware of the Credit Review Office up
from 61% in both September 2015 and September 2014.
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At an overall level, 50% of all SMEs believe that the banks are currently lending to at least
some SMEs, 21% believe they are not, while 29% are unsure. Micro and small sized
companies are least certain in this regard. Of the 21% who believe that the banks are not
lending, a quarter claim that their view is based on personal experience (down from 33% this
time last year), with the balance basing their opinion on information from business
organisations, media reports, or the views and opinions of their peers.
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2. Introduction
This Report presents the results for the latest wave of the SME Credit Demand Survey
commissioned by the Department of Finance, and covers the period April to September 2016.
Behaviour & Attitudes Ltd, the independent market research and polling organisation, have
conducted this wave of the survey.
The key parameters of the survey have been kept identical to those in previous waves in
order to ensure comparability of data over time. This includes the quotas set for company
size and industry, the database of leads used to select businesses for interview, and the key
questions in the questionnaire itself.
All interviews for the study were conducted through Behaviour & Attitudes own in house
Computer Assisted Telephone Unit in Milltown House, Dublin. In total 1,526 telephone
interviews were conducted with a random sample of Irish micro, small and medium SMEs.
The interviews were conducted between the 10th October and the 3rd November, 2016.
2.1 Economic Context
The Irish economy is continuing to grow with GDP +4.3% in the last 12 months (CSO Q2,
2016). With further declines in unemployment and expected increases in consumption and
investment by Irish consumers and businesses, the outlook for the Irish economy remains
positive. However, it is worth noting that the recovery could be impacted by external factors,
i.e. less growth in key export markets and uncertainties post Brexit, USA presidential
elections, etc.
We also see a further improvement in the labour market. The standardised unemployment
rate continues to fall and was 7.7% in the second quarter of 2016. We also see a downward
trend in the number of insolvencies.
The Q3 2016 quarterly bulletin from the Central Bank confirms a broadly favourable outlook
for the Irish economy:
“Relative to a no-Brexit baseline, projected Irish GDP growth has been revised down by
0.2 and 0.6 per cent in 2016 and 2017, respectively. On this basis, and subject to the
caveats expressed earlier about conventional National Accounts measures, GDP is
projected to grow by 4.9 per cent this year and by 3.6 per cent in 2017. Supported by
continued solid gains in employment, underlying domestic demand is projected to grow
by close to 4 per cent this year, slowing to 3 per cent in 2017. This slowdown reflects a
projected negative impact from Brexit-related factors.
Notwithstanding these downward revisions, the outlook for the Irish economy remains
broadly favourable, with unemployment set to continue to fall further. However, risks
to the projections are clearly weighted to the downside, reflecting the possibility of a
more adverse impact on the UK economy, a larger spill-over to the broader international
economy or the potential for more negative domestic confidence and labour market
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effects than incorporated in the forecasts. Taking account of these risks and given the
potential for Brexit to have a negative and material impact, policies should remain
focussed on underpinning stability and reducing uncertainty.”
The Seventeenth Report from the Credit Review Office also noted a favourable outlook and
the improving performance of SMEs, although some SMEs do still have a way to go to return
to full financial strength. The report also highlighted some areas of concern for SME credit:
“I see two main areas of concern for SME and Farm lending; a) the remoteness of the
relationship with borrowers and; b) the increasing reliance on credit decision making
software.
The remoteness of the relationship with borrowers:
Current service models do not fully recognise that SMEs do not behave in the same way
as larger businesses and corporates. SMEs, particularly Micro and Small Businesses and
some Farms which are not as financially sophisticated, and many have difficulty in
presenting credit proposals which recognise all the boxes which need to be ticked in
current banks’ credit decisioning systems. In addition, it is important that the level of
information provision for small SME’s seeking lower levels of credit is not automatically
the same as the information requirement for larger SME’s seeking bigger credit
amounts…Banks have an ongoing role in the education of SMEs and Farmers in relation
to the presentation of lending proposals.
The increasing reliance on credit decision making software:
Banks must avoid over use of algorithms and credit scores to commoditise all SME
lending, and ensure that their Relationship Managers have a good knowledge of all the
credit tools which are available to assist SMEs…There is, for example, a need for banks
to adopt a more flexible approach in relation to impaired credit ratings, when assessing
requests for credit, where confirmation can be provided that debt settlements have
been successfully implemented in respect of legacy debts with other banks.”
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2.2 Government Support Measures
The Programme for Government contains a range of commitments to help support small and
medium-sized enterprises. This includes action to ensure that an adequate pool of credit is
available to fund small and medium-sized businesses in the real economy during the re-
structuring and down-sizing programme for the domestic banking sector. Since 2014, the
Department of Finance has examined and collated detailed data from AIB and Bank of Ireland
on a monthly basis, to ensure there is a more informed understanding of the SME bank lending
environment with a particular focus on new lending.
Strategic Banking Corporation of Ireland
The Strategic Banking Corporation of Ireland commenced lending via its initial on-lending
partners in March 2015.
To the end of June 2016, the SBCI has lent €347 million to 8,619 SMES. The SMEs who
received SBCI finance are from a variety of business and economic sectors and are spread
across every region of the country. More than 80% of loans are for investment purposes
(86.5%) and the average loan size is approximately €40,000. There is a broad geographical
spread of the SMEs supported with approximately 85% of them based outside Dublin.
The pace of deployment of SBCI funds to SMEs has continued at a similar level in 2016, and
a detailed breakdown of the loans for 2016 will be published in January 2017. To date, the
SBCI has committed a total of €836 million for on-lending to Irish SMEs, out of its current
funding capacity of €1.05 billion.
The SBCI has recently announced new on-lending agreements with four non-bank lenders,
Finance Ireland, Merrion Fleet, First Citizen and Bibby Financial Services Ireland. This is a key
step in creating greater competition for SME lending in the Irish market, by supporting smaller
indigenous players and providing funding for a broader range of products, including:
investment and working capital loans, lease and hire purchasing, invoice discounting and
refinancing.
The SBCI is committed to leveraging these existing on-lender relationships and encouraging
the entry of new on-lending partners to improve access to low cost, flexible, longer-term
finance for the SME sector and increasing competition in the SME financing market, thus
supporting SME growth and investment.
Supporting SMEs Campaign
Over 100,000 businesses and entrepreneurs had availed of the Government’s Supporting SME
Campaign since its launch in May 2014.
This campaign is a cross-governmental initiative developed to help small businesses and
entrepreneurs learn the full range of potential Government supports available to them. At the
heart of this campaign is the Supporting SMEs Online Tool, which brings together over 170
Government business supports from 30 Departments and Agencies to one simple-to-use
website.
The campaign comprises three essential components: the Online Tool itself, marketing of the
campaign and outreach to small businesses via events across the country.
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The “Supporting SMEs” online tool can be accessed at: www.supportingsmes.ie
Ireland Strategic Investment Fund
The Ireland Strategic Investment Fund (ISIF), previously the National Pensions Reserve Fund
(NPRF), is a cornerstone investor in two SME funds making equity and credit available to SMEs
and mid-sized corporates in Ireland:
SME Equity Fund - Carlyle Cardinal Ireland (CCI)
This is a €292 million fund focused on lower mid-market private equity investing with an ISIF
commitment of €125 million. Since the inception of the fund, Carlyle Cardinal has developed
strong networks across Ireland and has generated a strong pipeline of attractive opportunities
for the fund. The Fund completed 6 transactions as at 30 June 2016, with investments
completed to date in Lily O'Brien’s, GSLS, Carroll Cuisine, Payzone, Abtran and Learning Pool.
A further new investment in AA Ireland was completed in August.
SME Credit Fund - Bluebay
The BlueBay SME Credit Fund is a €450 million credit fund focused on lending to large SME
and mid-sized companies with an ISIF commitment of €200 million. The Fund considers credit
provision through acquiring and refinancing loans close to maturity where existing lenders are
not willing to provide new lines of credit. Lending by the Fund is at competitive market rates
with loan sizes ranging from €5 million to €45 million with a projected average size of €15
million. As of 30 June 2016, BICC had invested €304 million in nineteen loans to fifteen Irish
SME businesses. Of the loans completed to date, two have been fully repaid and four loans
are follow-on deals with three companies.
Both Funds are active in the market place, sourcing deals and have been key drivers in
bringing liquidity back into the SME sector. The pipeline for equity investment is good and the
SME credit market is becoming increasingly competitive compared to the time of launch of
these funds in 2013, where the domestic banks have become more active in the space
especially at the upper end of the SME sector (i.e. mid-sized corporates).
In addition to these, the following two investments have been announced in 2016:
BMS Finance Ireland
The €30 million fund, BMS Finance Ireland, provides debt finance to high-growth Irish SMEs
for working capital, contract wins, capital expenditure, acquisitions and MBOs. BMS Finance
Ireland is backed by investors including ISIF. BMS Finance Ireland provides finance on a senior
secured basis, without the need for personal guarantees or personal security. Loan sizes
ranging from €0.5 million to €5.0 million will be considered with the focus on loans from €1.0
million to €3.0 million.
BMS focuses on supporting entrepreneur and owner managed businesses but will also look at
venture capital or private equity backed businesses. The Fund is sector agnostic but does not
seek property or property development investments. BMS Finance Ireland will complement
BMS's existing UK fund which is backed by the British Business Bank and provides similar
finance to UK based SMEs. BMS has opened an office in Dublin to support the new fund.
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Causeway Capital
Causeway Capital Partners I LP is a new €60m Dublin based private equity investment fund
targeting fast-growing small and medium businesses in Ireland and Britain. ISIF is a
cornerstone investor of the fund, investing alongside AIB and a number of private investors.
The fund has also recently introduced the European Investment Fund (EIF) as a new
cornerstone investor. To date, the company has completed significant investments in two
Irish SMEs, BB’s Coffee and Muffins and Bizimply, with further investments expected to be
announced before the end of the year.
Enterprise Ireland Seed & Venture Capital Scheme
To develop the domestic venture capital system, the Government commitment of
€175 million under the Seed and Venture Capital Scheme 2013-2018 aims to leverage a
further €525 million from the private sector, for investment in high potential start-up and
scaling companies.
Microfinance Ireland and the Credit Guarantee Scheme
The Government has also launched both the Credit Guarantee Scheme and the
Microenterprise Loan Fund. The Microenterprise Loan Fund is managed by Microfinance
Ireland on behalf of the Government. It allows microenterprises and sole traders across all
sectors, employing fewer than ten people, to apply for loans of up to €25,000.
The Credit Guarantee Scheme is open to businesses employing fewer than 250 staff and with
an annual turnover of less than €50 million (SMEs). It offers State guarantees on loans of up
to €1 million. Under the scheme, a 75% State guarantee is to be provided to banks against
losses on qualifying loans to firms who otherwise have difficulty getting credit owing to
inadequacy of collateral or inadequacy of banks’ understanding of the novelty of a business
model, market, sector or technology.
Legislation to amend the Credit Guarantee Scheme was recently enacted by the Oireachtas,
and Schemes are currently being developed to comply with this legislation. Once the Schemes
are finalised they will increase the maximum guarantee provided by the State from 75% to
80%.
Cash Flow Support Loan Fund for Farmers
The agri food industry is Ireland’s largest indigenous industry, contributing €26 billion in
turnover last year, and accounting for 7.6% of GDP, 8.4% of employment and 10.7% of
merchandise exports. Given the market difficulties and price volatility currently being
experienced by farmers, it is important that the agri food sector is adequately supported.
In order to address this matter, the Department of Agriculture, Food and the Marine (DAFM)
and the Strategic Banking Corporation of Ireland (SBCI) has developed a €150 million Cash
Flow Support Loan Scheme for farmers. The scheme is supported by €11 million of EU
Exceptional Adjustment Aid and further funding from DAFM, under a derogation from state
aid regulations that ordinarily apply to the agriculture sector. This scheme is also supported
by a COSME counter guarantee facility.
This fund will be used to provide highly flexible, low interest loans to the farming sector and
will be operated by the SBCI.
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2.3 Rationale for this Demand Study
The 4th report of the Credit Review Office suggested “existing ‘credit surveys’ are being used
widely as a commentary on the availability of bank lending. These surveys are not quality
assured by any reputable market research organisation and may be misleading to many
businesses into not seeking bank credit and using alternative sources of financing both of
which are risky”.
As such, Irish SMEs, the Government, policy makers and other stakeholders require a reliable
and reputable demand study to be conducted either as a once off exercise or as part of an
on-going process. This report represents the output from such a demand study exercise.
2.4 Study Scope
The scope of this exercise was to establish a regular, independent measure of the demand for
credit (encompassing all lending institutions) from the perspective of the SME. Additionally,
and since the provision of credit to SMEs extends beyond the two pillar banks, information is
required to inform Government as to the experience of micro, small and medium-sized
enterprises in accessing credit from the banking sector as a whole. In this context, the
Department of Finance commissioned this study to ascertain the situation in relation to:
the demand for credit from SMEs
the failure of SMEs to seek credit
the reasons given for refusal of credit and
their level of knowledge on their rights in relation to credit.
Company Size
This Review was conducted on the basis of companies falling into one of three categories of
SMEs, as determined by the EU definition of each category, which can be broadly summarised
as follows:
Description Employee Numbers Turnover Balance Sheet Value
Micro 1-9 <=2million <=2million
Small 10-49 <=10 million <=10 million
Medium 50-250 <=50 million <=43 million
*A company which satisfies two of the three criteria is deemed to be a SME, one of which is
employees.
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Credit Products
The Review covered the following credit products:
Overdrafts
o New overdraft
o Renewal/ restructuring of an existing overdraft
Loan
o New loan
o Renewal/ restructuring of an existing loan
Invoice discounting
Leasing or hire purchase
Bonds (bank backed, advance payment of other bonds etc.)
Other credit products
Sectoral Analysis
In order to ensure that information produced as part of this study was comparable with
previous studies and could be collated to form a sectoral picture, we have used Central Bank
sectoral codes.
Central Bank sectoral codes are those codes used by the Central Bank, and specified
at EU level, under which individual banks submit their quarterly returns to that
Organisation. These codes are based on NACE Rev. 1 codes.
The NACE Code system is a pan-European classification system which groups
organisations according to their business activities. It assigns a unique 5 or 6 digit
code to each industry sector e.g. B - Mining and Quarrying - B5 - Mining of Coal and
Lignite.
In order to ensure that the results are representative of the overall SME population,
the construction sector, in so far as property development and speculative activities
are concerned, has been excluded. Only companies who support or supply to the
construction sector have been included.
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The specific sectors or subsectors included in our analysis on the basis of NACE codes
are shown below:
NACE Categories
Agriculture/Forestry/Fishing
Manufacturing - processing & food
Manufacturing – high tech
Manufacturing – other
Construction – general construction
Construction – other
Wholesale
Retail, Trade and Repairs – non-motor
Retail, Trade and Repairs – motor only
Hotels & Restaurants (including bars)
Transport/storage/communication
Financial & Other Business Services
Real Estate activities ( excl. speculative)
Professional, scientific and technical
Human, Health and Social Work
Admin and Support services
The specific sectors or subsectors excluded from the analysis are set out in detail below:
Non SME related financial intermediaries: non-bank credit grantors, credit unions,
collective investment schemes, SPVs asset-backed securities, pension funds
Speculative real estate activities
Speculative construction activities
Educations – schools and colleges
Hospitals
Churches and religious organisations
Charities
Government (central and other)
Extra-territorial organisations and bodies
Private household lending.
Time Period of Study
In reviewing results it should be noted that the time period of this study is a six month period
from April to September 2016. Seasonality may have an impact on the results of the study.
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3. Methodology
This survey represents a study of lending to SMEs conducted in Ireland examining the issue
of credit availability. For this wave of research the survey was carried out by the independent
market research company Behaviour & Attitudes.
3.1 Sample Selection
The study sample was selected at random from an industry-leading database of all SMEs
across Ireland supplied by Bill Moss, the leading compiler and database provider in Ireland.
This database is compiled from multiple sources and updated regularly. At the date of writing,
the database held approximately 130,000 SME records.
A starting sample of 10,000 SMEs was randomly extracted from this database, across each
SME size category and NACE sectoral group, ensuring that respondents included a reasonable
spread of micro, small and medium-sized SMEs and a proportional representation of 16 key
business sectors set out in Section 2.4 above.
In total, 6,518 companies were contacted to complete the 1,526 interviews, with some
companies either falling outside of the quotas classifying small and medium enterprises,
others refused to take part or could not do so within the time frame set out for interview.
Quotas were set in order to ensure that the sample was sufficiently representative of the SME
population in terms of both SME size (micro, small and medium) and sector (as defined by
NACE codes); and also matched the previous waves of this survey.
3.2 Sample Accuracy
The sample error for a survey of this nature is very good. Based on a total database of 130,000
SMEs in Ireland, the total sample of 1,526 companies has a possible sample error of just +
or – 2.5% (at a 95% significance level), while the sub samples of micro, small and medium
companies (each with approximately 500 interviews) has a possible sample error of just + or
– 4.4%.
3.3 Collection of Data
Telephone interviews were conducted with 1,526 Irish micro, small and medium SMEs, based
on a questionnaire finalised between the Department of Finance and Behaviour & Attitudes.
Changes to the questionnaire were kept to a minimum this wave, in order to ensure
comparability to the previous wave. The changes made this wave included removing a
question which asked is your business involved in computer software/hardware business. A
new question was added to establish the causes for difficulty in sourcing export related finance
amongst all who reported difficulty. Ulster Bank and Permanent TSB were added to the list of
banks in the question relating to awareness of the Credit Review Office and the questionnaire
also sought to establish what impact Brexit would have on business.
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All interviews were conducted between 10th October and 3rd November 2016 and covered the
period from April to September 2016. Over the course of the study, 1,526 SME interviews
were conducted. The typical telephone interview lasted between 5 and 35 minutes, depending
on the level of credit demand.
Data from completed questionnaires was reviewed, analysed and the results are presented in
this Report. The full study questionnaire is attached as an Appendix to this Report and detailed
results are presented in Sections 4-9.
3.4 Comparative Results
All key parameters of the methodology used in this wave of the Credit Demand Survey were
kept the same as in previous waves, in order to ensure direct comparability. This included the
approach, quotas, key questions in the questionnaire, and sample database.
Within each micro, small and medium category the number of study respondents by sector
can vary slightly (+/-2% on a sectorial level). Results for this study were weighted to the
same size profile as that used in the prior study.
Information relating to applications is based on actual results on the basis that lenders must
consider each application for credit on its own merit.
3.5 Sample Size
1,526 SMEs participated in the telephone interviews. Companies were allocated to micro,
small and medium size categories based on employee numbers as a proxy for company size.
The three SME size categories have very different characteristics. As such, and in line with
previous surveys, SMEs should not necessarily be considered as a single population but as
three distinct populations – micro, small and medium. Study results have been provided
separately for each category and this Report should be read on that basis.
A sample of SMEs were contacted and asked to respond to a phone based questionnaire. This
sample was selected from a database of approximately 130,000 companies. The study was
carried out in October 2016 and respondents were asked to respond based on their experience
from April 2016 to September 2016.
It should be noted that whilst the physical number of micro enterprises operating in Ireland
is significantly higher than the number of small and medium enterprises, the economic weight
or value of each category of SME (micro, small and medium) to the Irish economy is broadly
similar.
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3.6 Limitations
The results set out in this document should be considered in the context of the following
limitations:
1. The study provides the consolidated opinions of a wide range of SMEs but it is not a
census of the entire population of SMEs in Ireland.
2. Each study collects responses from a random sample of SMEs and hence the
change in the underlying quality and characteristics of the business will contribute to
some of the variations noted from study to study (however, sample error rates shown
earlier should account for this).
3. Whilst every effort has been made to ensure that the study sample is as fully
representative of the population as a whole as possible, it is possible that certain sub-
groups are under-represented. It should be noted that the following sub-populations are
relatively small for robust analysis:
a) The study included a sample of companies which employed one person
(i.e. were self-employed).
b) The study included a number of companies who had been in business for up to
two years, however this type of company has generally not filed company
accounts and/or is not listed in Company Registration Office records and is not
in the database used for sampling purpose.
4. Demand for credit and the bank lending decisions surrounding the approval of credit are
complex, multi-faceted, and unique to each individual SME application. Not every
variable contributing to a credit decision can be probed during a telephone interview
and likewise the characteristics of the respondents business cannot be fully and
comprehensively captured in such a timeframe.
5. Slight rounding may occur in the graphical or other representation of figures in this
document.
3.7 Other Research
We have examined the research work conducted in the area of SME lending (demand and
supply) by various stakeholder groups. These include the Central Bank of Ireland, CSO, Credit
Review Office and ESRI amongst others.
3.8 Privacy of the Respondent
Throughout the study process all interviews conducted with SMEs were carried out on a
confidential basis and the respondents’ rights under the Data Protection Act(s) were fully
observed including the rights of respondents to choose not to answer or to end the interview
at any stage. In all instances the interviewer ensured that responses were collected from the
person who had primary responsibility for financial matters in their business.
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The Department of Finance had no specific interest in the individual financial affairs of any of
the SMEs that participated in this study. Rather, the key objective was to better inform
Government of the volume, nature and demand for credit in this key sector of the Irish
economy.
We would like to express our sincere thanks to all those SMEs who have participated in this
study.
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4. Profile of Respondents
4.1 Company Size, Turnover & Length of Time in Business
To be able to compare the results from the credit demand study wave by wave, it is important
that the samples achieved are similar on key business demographics. This was achieved
through strict quota control on company size and sector.
The above confirms the similarity of the samples with identical distribution on company size
and almost identical distribution on turnover and length of time in business.
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4.2 Exporting Companies
21% of the companies interviewed export goods or services outside the Republic of Ireland.
It is worth noting that the export question (Q.1d) was changed slightly from the March 2013
wave and again for the March 2015 wave which might impact comparability for this question
slightly over the years.
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Just 6% of all exporting companies have had difficulty sourcing export related finance.
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Among those SMEs who do not currently export, 3% have begun, or are considering exporting
at a future date. This is unchanged from the previous wave.
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4.3 Innovation
48% of SMEs have engaged in innovative activities over the past 6 months – this is a decrease
of 2% vs September 2015.
Sept 2013 Sept 2014 Sept 2015 Sept 2016
% % % %
New marketing concepts/strategy 31 38 27 28
New business practices/methods of organising work/external relations
28 33 26 19
New/improved services 22 27 22 22
New improved methods of production, distribution or support activity
16 20 17 12
New/improved goods 17 24 18 19
Any innovation 51 61 50 48
None of these 49 39 50 52
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4.4 Regular Financial Management Tasks & Use of Financial Advisors
Compared to September 2015, we see similar levels in terms of the financial management
tasks undertaken by the companies. 86% maintain regular management accounts
(unchanged from September 2015), 67% maintain an existing business plan – similar to the
level seen a year ago. However, we see a decrease for the second year in the incidence of
using financial advisors in the past 6 months. 39% of SMEs have used financial advisors in
the past 6 months – this is down from 47% in September 2015. Also we see a decline in
estimating cash flow requirements for the coming months (61%, down from 70% in
September 2015).
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5. Trading Performance
5.1 Turnover Trends
Trading conditions for SMEs in the period April to September 2016 remain favourable with
similar proportions of SMEs claiming increased turnover in the past 6 months (46%) compared
to the same 6 month period in 2015 (47%). 42% report that turnover is unchanged while
12% of the SMEs report that their turnover has decreased in the past 6 months. Comparing
turnover trends over the past 3 years, we see that trading conditions for SMEs remain
favourable and the proportion of SMEs are settling in on a plateau of turnover.
Among those SMEs with increased turnover, 37% have seen a slight increase (0-9%), while
19% have had an increase larger than 20%. Among SMEs with decreased turnover, 30%
report a modest decrease of 0-9% with 30% reporting a decrease in turnover of more than
20%.
Trading conditions are quite different when looking at different company sizes. Medium-sized
companies have the most favourable trading conditions and see an improvement, similar to
September 2015. 55% of Medium-sized companies report increased turnover compared to
56% in September 2015. Only 10% of Medium-sized companies report a decline in turnover
– this is down from 12% at this time last year.
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Micro companies continue to have the least favourable trading conditions with 40% of these
reporting increased turnover in the period April – September 2016 – this is up from 38% the
year before. Less Micro companies claim decreased turnover in the past 6 months compared
to last year (14% now versus 21% in September 2015).
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Looking at those SMEs with increased turnover in the last 6 months, we see that Micro
companies are more likely to report high turnover growth (20+% increase in turnover). The
opposite is the case for Medium-sized companies where just 11% claim high turnover growth.
It is however worth noting that the proportion of Medium-sized companies with high turnover
growth in September 2015 was high and had reduced to 14% in March 2016.
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Removing seasonality (considering the six months cycle of each survey) by only looking at
SMEs with non-seasonal turnover, we see no change overall in trading conditions compared
to September 2015. However, over the last 3 years the proportions with turnover remaining
the same has steadily increased. 45% of all companies with non-seasonal turnover report
increased turnover in the past 6 months compared to the previous 6 month period. 12%
report a decrease in turnover while 43% have seen no change in turnover in the past 6
months.
Looking at turnover development by company size excluding seasonal turnover, we see a
significant improvement in trading conditions for Medium-sized companies year-on-year. 55%
of these companies report increased turnover compared to just 51% in September 2015. Non-
seasonal trading conditions are relatively stable for Micro and Small-sized companies.
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Turnover by Sector
Most sectors do not see any significant change in trading conditions from April to September
2016 with more companies having seen increased turnover than companies reporting
declining turnover in the past 6 months. The hotels & restaurants sector has the highest
proportion of SMEs reporting increased turnover followed by construction.
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Turnover for Exporting Companies
The relative performance of exporting companies has diminished over the last twelve months,
however, with a corresponding uplift in turnover for non-export companies.
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5.2 Employment Trends
In line with the proportion of SMEs reporting turnover plateauing, staff developments also
remain more stable from April to September 2016. 29% of all SMEs have increased staff
numbers in the past 6 months. 7% have decreased staff numbers in the past 6 months while
64% have not changed their staff numbers in the past 6 months.
Amongst SMEs with increased staff numbers, 46% have had moderate growth (0% - 9%) in
staff. 22% have increased their staff numbers by more than 20%. A further 31% have
increased their staff numbers by 10% – 19%. Amongst those who have decreased their
number of staff, on average the decrease was by about 15%.
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Unlike the differences seen in trading conditions, in terms of company size, all three company
sizes see very little change for staff development during this fieldwork period. Medium-sized
companies indicate the highest growth in staff numbers, with 43% indicating an increase of
staff numbers in the past six months. 34% of Small-sized companies indicate an increase in
staff numbers during the same period, while only 16% of Micro companies indicate an increase
in staff.
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5.3 Profit Trends
For the fourth year in a row we see an increase in the net profit/loss for businesses for the
past six months. 65% of all SMEs report a profit in the past six months (compared to 61% in
September 2015). 9% reported a loss, while 22% reported they broke-even.
Compared to September 2015, we see an increased profitability emanating from Micro and
Small-sized companies. Medium-sized company profitability, while still reporting the highest
proportion making a profit, has decreased slightly compared to this period last year (70%
now report making a profit, with 9% reporting a loss).
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5.4 Overall Trading Trends
In line with previous trends, the positive trading trends of profitability over the past few waves
appear to have had an impact on the mind-set of SMEs, with more companies pursuing some
form of growth strategy. The majority continue to focus on smaller growth opportunities
rather than rapid growth – indicating a more cautious SME environment.
However, it should be noted that all sizes of SMEs are reporting some interest in rapid growth
(Micro companies 9%, Small-sized companies 15%, Medium-sized companies 21%).
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A strong relationship between turnover and profit performance exists with companies having
increased turnover being much more likely to report profit than companies with declining
turnover which are more likely to report a loss.
Turnover Increased
%
Turnover Remained the
same %
Turnover Decreased
%
Made a profit 79 59 62
Broke even 13 26 22
Made a loss 6 9 13
Don’t know / Refused 2 5 3
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5.5 Business Sentiment – Next 6 Months
While business sentiment remains positive overall for all companies of all sizes, we see a
decline in business sentiment as being registered this wave compared to September 2015.
48% of SMEs expect the business climate to improve in the next six months – this is down
from 58% in September 2015 and 51% in March 2016. This is the lowest level we have seen
in the past two years.
34% of SMEs now expect the business climate to perform worse in the next six months. This
is up 20 percentage points on September 2015 and 16 percentage points on March 2016.
Uncertainties about the world economy and the actual impact of Brexit are most likely to have
dampened business confidence of Irish SMEs. In addition, the mooted ‘Winter of discontent’
unfolding during the fieldwork period may also have played a role.
While we see declines in sentiment across all SME sizes, Micro companies see the biggest
decline in business sentiment, with 27% of these organisations expecting the business climate
to be worse in the next six months.
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Just 14% believe Brexit will have a positive impact on their business, while 57% believe it will
have the opposite effect. 30% of SMEs believe it will have no impact on their business.
There is a clear relationship between SMEs’ individual turnover situation and their business
climate outlook. SMEs with increased turnover over the past six months (April to September
2016) are much more likely to think the business climate of Ireland will improve over the next
six months.
Turnover Increased
%
Turnover Remained the same
%
Turnover Decreased
%
Agree 54 44 46
Neither agree nor disagree 24 29 30
Disagree 22 27 24
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6.0 Demand for Banking Finance
6.1 Current Demand for Credit
Credit demand for the period April to September 2016 has decreased versus the similar period
last year. 23% have applied for bank finance in the past six months compared to 30% in
September 2015. This is the lowest level of credit demand registered across the duration of
the survey.
The decline in credit demand is registered across SMEs of all sizes.
It should be noted that the backdrop is one of improved business sentiment and profitability
across the SME sector in the past six months. Also, there are indications that SMEs remain
somewhat cautious.
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Taking the impact of seasonality into consideration, a similar decline in SMEs seeking bank
finance in the past six months is registered. Credit demand among SMEs with no seasonal
demand has declined from 27% in September 2015 to 23% in September 2016. Taking this
seasonality into consideration, this decline in credit demand is driven by smaller enterprises.
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6.2 Future Demand for Credit
A significant decrease year on year is also registered in expectations for seeking bank finance
in the next six months. One in five of all SMEs expect to apply for finance in the next six
months, which is down from 27% in September 2015 but equal to the 20% recorded in March
2016.
It is worth noting that this is simply a prediction of possible future demand, and therefore
should not be directly compared to actual credit demand reported in the past.
The decline is driven more by Small- and Medium-sized SMEs.
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6.3 Reasons for Not Seeking Credit
In order to better understand the reason behind SMEs’ lack of demand for credit, companies
were specifically asked to provide reasons for not seeking credit in the past six months. The
reasons given were then grouped into business related and banking related reasons.
The main reason given is that bank finance is simply not required – with an increased number
(86%) of those businesses who did not apply for credit mentioning this. This is up 7
percentage points from 79% in September 2015.
Other key reasons for not requiring bank finance include companies stating they have finance
in place (4%) and those who prefer not to borrow (5%).
Total Company Size
Micro Small Medium
Business Related Reasons % % % %
Didn’t need it 86 83 87 90
Prefer not to borrow 5 9 4 2
Existing finance product in place 4 4 4 2
Use/raise personal funds when needed 2 3 1 2
Not the right time given the economic climate 1 1 0 -
Inability to repay/meet requirements of finance 1 1 0 -
Raise finance from grants 1 0 - 2
Too expensive to borrow 1 1 1 -
Existing debt burden already too high 1 1 1 -
Total
Company Size
Micro Small Medium
Bank Related Reasons % % % %
Belief that banks are not lending 1 2 1 1
Possible rejection 1 2 1 1
Application process too difficult 1 1 2 -
Don’t trust the banks 1 2 1 -
Too many terms and conditions 1 1 1 -
Have been turned down before 0 1 0 -
Banks take too long to make decision 0 0 1 -
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Bank related reasons are less commonly cited as reasons for not applying for bank finance in
the past six months.
Why did you not request Credit? ( ) = change since April 2016 Total
Company Size
Micro Small Medium
Bank Related Reasons % % % %
Belief that banks are not lending 1 (-2) 2 (-1) 1 (-3) 1 (=)
Possible rejection 1 (-2) 2 (-3) 1 (-3) 1 (=)
Application process too difficult 1 (+1) 1 (=) 2 (+2) - (=)
Don’t trust the banks 1 (=) 2 (+2) 1 (=) - (=)
Too many terms and conditions 1 (=) 1 (+1) 1 (=) - (=)
Have been turned down before 0 (-1) 1 (-1) 0 (-2) - (=)
Banks take too long to make decision 0 (=) 0 (-1) 1 (+1) - (=)
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6.4 Demand for Credit by Product
Among those SMEs who have requested bank finance in the period April to September 2016,
new loans, leasing or hire purchase and renewal/restructuring of existing overdraft and new
overdraft are the main bank finance products requested.
Leasing or higher purchase remains high at 28%, with new loans declining in terms of the
proportions requesting (28% down from 34% in September 2015). Renewal/restructuring of
existing overdraft has also declined from 36% in September 2015 to 16% in September 2016.
13% of those applying for bank finance have requested a new overdraft.
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Invoice discounting remains the least popular product with 4% of those who have applied for
bank finance having applied for this credit type. However, renewal/restructuring of existing
loans has also registered a drop to just 6% seeking such a financial product.
% of all products requested Sept 2013 %
Sept 2014 %
Sept 2015 %
Sept 2016 %
New overdraft 11 13 13 13 Renewal/ restructuring of existing overdraft
33
24
25 16 New loan 20 24 24 28 Renewal/restructuring of existing loan
16
12
11 6 Invoice discounting 6 6 5 4 Leasing or hire purchase 13 19 20 28 Other 0 2 2 4
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6.5 Demand for Credit by Sector
The largest decline in credit demand amongst SMEs emanates from the hotel & restaurant
and manufacturing sectors. The wholesale/retail trade and repair sector also registers a sharp
drop in credit demand. Construction is now the sector with the highest level of credit demand.
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6.6 Demand for Credit by Turnover and Profit Performance
It is interesting to look at credit demand by business performance to gauge whether
companies are requesting credit for growth or for stability/maintenance of the business. From
the results below, it is evident that both motivations play a role, albeit with greater levels of
credit demand from those who made a loss.
Turnover Requested Credit
%
Increased 32
Remained the same 27
Decreased 19
Profit Requested Credit
%
Made a profit 24
Broke even 20
Made a loss 31
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6.7 Cost of Credit
Amongst those with outstanding loans, the average claimed cost of credit stands at 3.2%.
This has declined compared to September 2015 where the cost of credit for outstanding loans
on average was 4.8%. 87% of SMEs with outstanding loans have an average cost of credit
between 3% and 10% (after excluding those who had refused to answer this question).
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6.8 Financial Position of Businesses
The numbers of days that go by before businesses are paid by their customers affects the
cash flow of the business and, thereby, also the need for external finance. Likewise, cash flow
can be improved by delaying paying customers to the business. 14% of SMEs feel that the
average number of days within which customers pay has increased during the period April –
September 2016 – this is down from 17% in September 2015. 76% feel that the payment
period is unchanged, while 9% feel customers are paying faster.
Analysing company size, we see that 9% of Medium-sized businesses (slight increase from
6% in September 2015) believe that customers are paying faster.
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In terms of supplier payment, we do not see any major change from September 2015. 85%
of all SMEs feel that the average number of days they take to pay suppliers to pay remains
unchanged, while 7% suggest that payment period has increased, an equal proportion (7%)
say they pay suppliers faster than before.
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Repayment of Current Loans
The financial position of a business can also be established by the incidence of having missed
repayments on existing loans, as this can be used to effectively avoid requiring credit in the
short term. Only 2% of SMEs suggested that they had missed repayments of loans in the
period April to September 2016. This is down slightly from 4% in September 2015. Note, the
smaller the company the more likely they are to have missed repayments.
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Adjustments to Current Banking Debt
Only 3% of SMEs made adjustments to their bank debt between April and September 2016.
The main types of adjustments made centre around repayment scheduling, term extension,
interest rate reduction and capital moratorium.
Base: All Who Have Adjusted Bank Debt
Sept 2013 %
Sept 2014 %
Sept 2015 %
Sept 2016 %
165 104 79 55
Payment Rescheduling 49 46 44 28
Capital Moratorium 18 14 14 12
Term Extension 32 20 26 17
Interest Moratorium 12 9 11 5
Interest Rate Reduction 19 22 24 16
Arrears Capitalisation 11 14 5 9
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6.9 Seasonality of Demand and credit
46% of SMEs indicate their turnover/sales are seasonal. Note, that year on year this has been
steadily decreasing. This has an effect on credit demand with 56% of businesses with seasonal
turnover also having seasonal credit demand.
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7.0 The Application Process
Of the total 1,526 SMEs interviewed for this wave of research, just under one quarter have
requested bank finance in the past 6 months – down from 30% in September 2015.
7.1 Nature of Demand
Purchases, replacement or lease of new vehicle/equipment has edged ahead as a main
reason for finance requests with 29% of those requesting bank finance in this period doing
so for this reason. This is followed by working capital/cash flow (27%) requirements and
growth & expansion requirements (26%).
Only 5% applied for bank finance in order to restructure a loan/credit – this is down from
9% in September 2015 and 7% in March 2016. The major changes centre on less need for
credit for working capital/cash flow and indeed expansion year on year.
Micro companies are more likely to require finance for working capital cash flow purposes.
Small- and Medium-sized businesses are more likely to require finance for purchase,
replacement or lease of new vehicle/equipment. In addition, the latter sized companies also
are more likely to require finance for expansion.
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7.2 Formal Applications for Credit
A similar level of formal applications for credit exist compared to September 2015, with 79%
of SMEs seeking finance formally applying.
Formal applications have increased amongst Small- to Medium-sized businesses, with Micro
businesses showing an increase in informal applications (albeit 70% of them still formally
apply).
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The main reasons cited for submitting an informal request is that the business felt there was
no need to make a formal application, as it was a repeat loan or a personal relationship.
Reasons for making an informal application Sept 2014 Sept 2015 Sept 2016
% % %
No need for providing formal application (e.g. repeat loan or personal relationship)
56% 52% 65%
To see if it would be possible 12% 6% 5%
Knew formal application would not be successful 6% 12% 10%
Time consideration 7% 3% 2%
Accounts not up to date 1% 0% -
Didn’t want finance from bank in the end 0% 4% 10%
The proportion of SMEs who applied for finance through one of the two pillar banks has
decreased this period. In total, 75% applied to the main pillar banks – down from 84% in
September 2015.
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7.3 Economic Value of Credit Applications
Each business that applied for credit provided us with the monetary value of that application.
When looking at applications for new bank finance (e.g. over draft, loan or lease/hire
purchase, the average stated amount is €104,680. This is lower than the stated value in
March 2016 at €309,000.
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Not surprisingly, as company size increases so too does the loan and value applied for.
As might be expected, there are stark differences between different sized companies in the
value of renewal/restructuring finance requested, with Medium-sized companies requesting
three times more than the average SME.
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7.4 Collateral Required for Credit Applications
Among those SMEs who applied for bank finance, 46% of applications required some kind of
collateral. This is a similar level to September 2015 where 40% required collateral.
The two most common kinds of collateral required were buildings and land/personal assets of
owner (house etc.), followed by machinery and equipment (5%) and accounts receivable
(5%).
Applications from Micro companies are less likely to require collateral, most likely due to
smaller amounts being applied for. The average value of collateral required as a percentage
of loan is 47%, which is lower than the level in September 2015 at 68%.
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7.5 Turnaround Time on Decisions
Based on the new regulations for firms lending to SMEs, with which regulated lenders (other
than credit unions) must comply from 1 July 2016 or, in the case of credit unions, from 1
January 2017, lenders are required to inform SMEs of a decision on their loan within 15
working days of receiving all information they require from the company. Excluding pending
applications and according to the businesses themselves, 68% of all finance applications are
all processed within the 15 working days. This is similar to the 65% in September 2015.
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The average amount of time from application to decision increased from 19 working days in
September 2015 to 25 working days in September 2016. It should be noted that this does
not differentiate between businesses who supply all information required by the lender at the
outset and those who receive requests for further information. The proportion of loans that
remains” still pending” has dropped from 15% in September 2015 to 9% now.
The larger the company, the longer the application turnaround time. The average turnaround
time for Micro companies is 18 working days, with Small-sized companies receiving decisions
within 26 working days, and Medium-sized companies waiting 33 working days on average.
Approved Declined
% %
Less than 1 week (1-5 working days) 38 22
Up to 2 weeks (6-10 working days) 19 17
Up to 3 weeks (11-15 working days) 12 19
Up to 4 weeks (16-20 working days) 8 9
Between 5-12 weeks (21-60 working days) 9 19
More than 12 weeks (61+ working days) 8 6
Don’t know 6 8
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7.6 Decline Rate
The decline rate for all credit applications in the period April – September 2016 has increased
slightly on September 2015. The current rate of decline stands at 15% of all applications –
this is up from 12% in September 2015.
74% of all applications have been approved in full over the past 6 months – this is an increase
when compared to September 2015.
A further 2% state their credit applications have been partially approved, leaving 76% of all
SMEs credit applications fully or partially approved. Just 9% of all applications are still
pending. This is down from 15% in September 2015.
Small- and Medium-sized businesses seeking finance are indicating higher levels of approval
rates. Micro companies, however, have lower approval rates, with an increase in rejection
rates from 15% in September 2015 to 21% in September 2016.
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Excluding pending applications, the overall decline rates stands at 16% (similar to September
2015). In total, 84% of all applications for the past 6 months (excluding “still pending”) have
been approved in full/partially.
Micro SMEs indicated the sole increase in rejection rates (from 18% to 22% now).
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Decline Rate by Product
Decline rate varies across financial type requested – which is a reflection of the differences
in application process. As was the case in September 2015, new overdrafts still have the
highest decline rates.
Lending Products
Yes
%
Partially
%
No
%
Pending
%
Total 74 2 15 9
New overdraft 62 4 25 10
Renewal/restructuring of existing
overdraft 67 4 13 16
New Loan 67 0 21 11
Renewal/restructuring of existing Loan 63 - 13 24
Invoice Discounting 76 - 15 9
Leasing or Hire Purchase 84 0 10 6
Bonds (bank backed, advance payment
of other bonds) 96 - - 4
Formal Application Decline Rate
Type Of Application
Yes
%
Partially
%
No
%
Pending
%
Total 74 2 15 9
Informal request 77 8 12 3
Formal application 76 0 13 10
There is no difference in the decline rate between formal and informal applications.
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Decline Rate by Type of Credit Applied For
Type of Application
Yes
%
Partially
%
No
%
Pending
%
Working Capital 70 5 18 8
Growth & Expansion 63 - 20 18
Property Related loan 62 - 24 14
Need to re-structure loan/ credit 48 - 28 24
Encouragingly, the banks are not more likely to approve funding for expansion at the expense
of working capital as was previously the case. Refusal rates are in fact highest for the need
to restructure loans/credit, and property related loans. Interestingly, pending applications are
lowest for working capital, with approvals highest for this category of application.
Decline Rate by Export vs. Non-Export Companies
Export vs. Non Export
Yes
%
Partially
%
No
%
Pending
%
Export Business 75 6 12 6
Non –Export Business 74 0 16 10
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The decline rates for export businesses are lower compared to non-export businesses. In
addition, export businesses have lower pending and greater partial approval compared to
non-export businesses.
The vast majority (94%) of companies who export report no difficulty in sourcing export
finance.
Decline Rate by Pillar/Non-Pillar Banks
Bank Applied To Yes %
Partially %
No %
Pending %
TOTAL 74 2 15 9
Pillar 76 1 15 8
Non-Pillar 74 3 15 8
There is no difference in application success by pillar versus non-pillar banks.
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Decline Rate By Sector
Sector
Yes
%
Partially
%
No
%
Pending
%
Total 74 2 15 9
Manufacturing 75 - 14 10
Construction 85 1 12 2
Wholesale 69 5 17 9
Hotels & Restaurants 67 - 23 11
Business Services 85 1 12 2
Other 66 0 13 20
The greatest level of decline rate is amongst the Hotel and Restaurants sector at 23%.
Decline Rate Linked To Company Trading Performance.
We continue to see a strong relationship between declined rate and company performance.
Those companies with increased turnover or profitability being much more likely to be
approved for bank finance.
Turnover Performance
Yes
%
Partially
%
No
%
Pending
%
Total 74 2 15 9
Increased 75 2 15 8
Remained The Same 69 - 22 9
Decreased 75 3 12 10
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Profit Performance
Yes
%
Partially
%
No
%
Pending
%
TOTAL 74 2 15 9
Made a profit 82 1 10 7
Broke Even 60 4 24 12
Made a loss 68 3 26 3
The average interest rate on approved new credit provided by banks is claimed to be
5.24%. This compares to 6.7% in September 2015, with 22% of businesses not sure
exactly what rate they are being charged.
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7.7 Criteria, Conditions and Interest Rates Attached to Approved
Applications
Of those applicants for whom conditions were applied, the most common conditions were
personal guarantees, the provision of regular management accounts and or a facility fee.
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7.8 Reasons for Decline
The main stated reasons for credit decline remain centred on applicant controlled factors,
particularly account performance/history.
Reason for Decline
Sep ‘14 %
Sep ‘15
%
Sept ‘16
%
Applicant Controlled 42 43 52
Inadequate repayment capacity 13 17 16
Account performance/history 16 14 24
Existing debt burden already too high 8 10 15
Inadequate historic information provided 5 3 5
Deterioration in business financial performance 12 5 14
Bank Controlled 32 32 27
Change in bank lending policy 11 18 12
No longer a sector to which the bank is prepared to lend 10 6 10
Change in bank pricing policy 3 5 0
Inadequate/insufficient security 8 9 10
No longer a type of business to which the bank is prepared to lend
8 5 9
Requested facility was sanctioned at lower level/different structure
2 5 7
Other 8 7 25
No reason given/none 24 26 19
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7.9 SME Opinions on Reasons for Decline
86% of those SMEs who have been declined bank finance disagree with the reasons given
for their refusal. This is an increase from 77% in September 2015 and 80% in March 2016.
9% of those SME who have been declined bank finance fully agree with the reasons for their
refusal. This is a decline from 21% in September 2015 and 12% in March 2016.
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7.10 The Right to an Internal Bank Review
An improvement was registered amongst those applicants who were refused credit in terms
of the bank informing them of their right to an internal review on the decision to refuse credit.
In September 2015 only 27% of all SMEs refused credit claimed they were informed of the
right to an internal review, this has increased to 47% of all SMEs refused credit in September
2016.
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7.11 Credit Review Office
Excluding Don’t Knows (which have been increasing over 3 years), an increased number of
those applicants who applied for credit from the pillar banks said they were informed of their
right to a decision review by the Credit Review Office. Excluding Don’t Knows one third claimed
they were informed in September 2015, and this has increased to over half being informed in
September 2016.
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7.12 Drawdown of Approved Facilities
63% of SMEs whose applications were approved, have availed fully of the given credit facilities
– this is similar to the levels in September 2015. An additional, 12% partially availed of the
credit facilities. 25% of SMEs have not availed of the facilities yet – up from 21% in September
2015.
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8.0 Non-Banking Finance
8.1 Enquiries for Non-Bank Finance
The number of enquiries made for non-bank finance has been steadily decreasing since
September 2012 and now stands at just 8% of SMEs having sought non-bank finance in the
period April to September 2016.
Crowd funding/peer to peer lending has not risen above the 1% point level it showed at in
September 2014. In this latest wave, the figure is below 1% with just three respondents
mentioning it. When these three respondents were subsequently asked if they were
successful in obtaining finance through crowd funding/peer to peer lending, all three
reported they had been successful.
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8.2 Decisions Made on Non-Bank Finance Applications
In total, 55% of all non-bank finance enquiries were successful with an additional 5% partially
successful. This is a notable increase from September 2015 where just 53% of applications
were fully or partially successful.
The decline rates are 15% - down from 21% in September 2015. A similar level of “still
pending” applications still exist year on year. The decline rates for non-bank finance rates are
similar to bank finance, with more pending non-bank finance applications. Overall, bank
finance successful applications are significantly higher than non-bank finance applications.
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8.3 Reasons for Not Applying for Government Financial Support
The main reasons given for not applying for Government financial support were a lack of
need for such finance (69%), and a lack of knowledge of such funding (11%).
Reason for Not Applying for
Government Financial Support
September
2014
%
September
2015
%
September
2016
%
Don’t need this type of financing 66 64 69
Lack of knowledge 24 18 11
I don't believe this source is relevant for my business or
sector 12 15 4
Already have this type of financing in place so do not need
more 1 2 2
Application process too difficult 2 3 2
Don't want to lose control of business 5 2 2
Previously rejected for this type of finance 1 2 1
Costs/Fees are too high 1 1 1
Terms and Conditions too onerous 1 1 1
Used in past but not currently relevant 0 1 1
Didn't think we would get it 1 1 -
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8.4 Awareness of State Funded Support
Awareness of State funded support is highest for Enterprise Ireland (86%) followed by local
Enterprise Offices (67%). 40% of SMEs are aware of the Credit Guarantee Scheme (which is
an increase from 35% in September 2015). One third are aware of the Micro Finance Loan
Fund scheme (similar to September 2015). Awareness of the supporting SMEs Online Tool
stands at 29% (slightly higher versus 26% in September 2015). Awareness of the Strategic
Banking Corporation of Ireland (SBCI) stands at 21% (slightly lower than September 2015).
29% of SMEs agree that they have a good knowledge of state funded supported available –
this is an increase on previous September waves (in fact, this is the second year in a row for
increased awareness levels). There continues to be a strong appetite for state support with
72% of all SMEs agreeing that they would like to see more information on how businesses
should apply for state funded support. These are similar levels to 2015.
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8.5 Financing the Business
Internal funds/retained earnings continue to remain the main financial source of working
capital, with 73% of working capital coming from this source. This is an increase of four
percentage points on September 2015.
Average expenditure on fixed assets Sept 2015 Mar 2016 Sept 2016
All SMEs €334k €358k €342k
Micro €57k €131k €69k
Small €170k €110k €149k
Medium €644k €705k €752k
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Internal funds/retained earnings also continue to be the main source of finance for fixed
assets acquisitions and this figure rose by four percentage points up from 69% in September
2015 to 73% in September 2016, followed by borrowings from banks up one percentage point
to 9% year on year.
Source of finance for fixed asset acquisitions Sept 2015 Sept 2016
Internal funds/retained earnings 69% 73%
Borrowed from banks 8% 9%
Leasing arrangements 10% 7%
Owners’ contribution 5% 5%
Credit from suppliers 3% 2%
Borrowed from non-bank financial institutions 3% 1%
Loans from friends and relatives 0% 1%
Advances from customers 1% 1%
Other 1% 2%
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9.0 SME Awareness of Credit Supports
9.1 Credit Review Office
An increase in awareness amongst SMEs of the Credit Review Office is evident, with two
thirds of SMEs now aware of its existence (this is a 3 percentage point increase on
September 2015). Awareness increases most amongst Micro SMEs.
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9.2 The Perception of Banks Lending to Irish SMEs
21% of SMES believe banks are not lending to the SME sector – this is a similar level to
what we have seen in September 2015. However, we see the proportions of SMEs which are
not sure if the banks are lending increase from 22% in September 2015 and 27% in March
2016 to 29% this wave. 43% believe banks are only lending to a small number of SMEs,
while 7% believe banks are lending to a large number of SMEs.
Micro and Small-sized SMEs are most likely to be uncertain as to whether banks are lending
to SMEs.
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Of those who suggest that banks are not lending or only lending to a small number of
companies, 26% claim this is based on personal experience - this is down from 33% in
September 2015. The rest hold the opinion based on business organisations, media reports
or peers.
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Appendix: The SME Demand Survey Questionnaire
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DEPARTMENT OF FINANCE SME CREDIT DEMAND SURVEY
QUESTIONNAIRE September2016
Good morning/afternoon/evening. My name is ………………… from Behaviour & Attitudes, the independent Irish
market research agency.. We are conducting a survey on behalf of the Department of Finance. Please may I speak
to the person with primary responsibility for financial matters in your business? Verify right person. Q.1 Can I just confirm that you are the person who has primary responsibility for financial matters in your
business? Yes......................................................................................... 1 CONTINUE
No .......................................................................................... 2 We are conducting a survey on bank lending to SME’s on behalf of the Department of Finance. This survey has
been conducted on a number of occasions and the Department has published the results. We may also be
conducting this research again over the coming months. All information that we collect will be kept in the strictest
confidence and results will be reported at a merged level only. It will not be possible to identify any particular
individual or business in the results and no information will be provided to the Department of Finance or any bank
that could identify you or your company.
Q.1a For this survey we need to talk to businesses of different sizes and in different industry sectors. Can you
confirm that your business operates in _________________ (sector)?
Yes......................................................................................... 1 No .......................................................................................... 2 IF ‘NO’ at Q.1a ASK
INDUSTRY SECTOR Q.1b ASK Q.1b IF NO AT Q.1a Q.1b What industry sector do you operate in? PROBE TO PRECODES – SINGLE CODE CHECK QUOTAS Agriculture & forestry & fishing.......................................................................................................... 1 Manufacturing - Processing & Food from agricultural activities + manufacturing of food from non agricultural activities (tobacco and beverages ................................................................................... .2 Manufacturing - High Tech (including pharmaceutical, electronic, electrical equipment etc.)........... 3 Manufacturing - All other manufacturing............................................................................................. 4 Construction - General construction (including general building & civil engineering).......................... 5 Construction - All other construction activities (excluding speculative activities)................................ 6 Wholesale.............................................................................................................................................. 7 Retail Trade & Repairs (non motor)..................................................................................................... .8 Retail Trade & Repairs (motor only) .....................................................................................................9 Hotels & restaurants ............................................................................................................................10
Transport, storage & communications .................................................................................................11 Financial & Insurance Activities ............................................................................................................12
SECTION 1 – COMPANY INFORMATION
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Real estate activities (excluding speculative activities) ........................................................................13 Professional, scientific & technical .......................................................................................................14 Administrative & Support Service Activities......................................................................................... 15 Human Health & Social Work Activities............................................................................................... 16 Other .............................................................................................................................................. 17 CLOSE
Q.1c Which of the following statements about export outside the Republic of Ireland best applies to your
business? SINGLE CODE – READ OUT OPTIONS
Our firm regularly exports........................................................... 1 We began exporting in the last six months…….……………………….. 2 We are thinking of exporting at a future date…………………………..3 We don’t export ………………………………………………………………………4
ASK IF EXPORT (CODE 1or2 IN Q1D) Q.1c_1 What percentage of the firm’s sales are exported?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE SCRIPTER: ALLOW DON’T
KNOW, MIN-MAX 1-100 ___________ % of total sales
ASK IF EXPORT (CODE 1or2 IN Q1D) Q.1c_2 Have you had any difficulty in sourcing export related finance in the past 6 months, i.e. April 2016 –
September 2016?
Yes ............................................................ 1 No ............................................................. 2
ASK IF YES AT Q1C_2 Q1c_3 What were the reasons for this difficulty?
MULTICODE PROBE FULLY, DO NOT READ OUT
Lack of collateral/security………………………………………………………………………………………………………. 1 The sector in which your business operates is no longer a sector to which the credit provider is
prepared to lend……………………………………………………………………………………………………………………. 2
Deterioration in business financial performance……………………………………………………………………. 3 Request for credit was sanctioned at a lower level/different structure to that requested 4 Beyond the credit provider’s risk appetite…………………………………………………………………………….. 5 Inadequate/insufficient security…………………………………………………………………………………………….. 6 Too expensive………………………………………………............................................................................. 7 Lengthy process/delay in Bank making a decision ………………………………………………………………….. 8 Jurisdiction/country which you sought to export to 9 Other (specify)…………………………………………………………………………………………………………………………. 10 Don’t know……………………………………………………………………………………………………………………………… 11
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ASK ALL Q.2 Including yourself, how many people are currently employed in your business?
INTERVIEWERS PLEASE NOTE THAT THIS INCLUDES FULL AND PART TIME EMPLOYEES BUT SHOULD
ONLY REFER TO THE Full Time Equivalent (FTE) number of EMPLOYEES. SCRIPTER: ALLOW DON’T KNOW _________ SCRIPTER: MIN-MAX 1-249, IF MORE THAN 250 CLOSE ONLY FOR QUOTA CONTROL, NOT PART OF SCRIPT
1 (self-employed) ................................................................... 1 MICRO:
2 - 4 ........................................................................................ 2 CHECK QUOTAS
5 - 9........................................................................................ 3 10 -20 ..................................................................................... 4 SMALL: 21 – 49................................................................................... 5 CHECK QUOTAS 50 - 100 .................................................................................. 6 MEDIUM: 101 – 249 ............................................................................... 7 CHECK QUOTAS 250+ ....................................................................................... 8 CLOSE
Refused/ don’t know ................................................................9 Q.2a What was your business’ turnover in the last 12 months i.e. for the period April 2016 – September 2016 ?
€_____________________ SCRIPTER: MAX 50,000,000 IF MORE THAN 50m CLOSE
IF DON’T KNOW/REFUSED ASK Q.2A1 Q.2a1 What was your business’ turnover in the last 12 months i.e. for the period October 2015 to September
2016 as per the following bands?
READ OUT - SINGLE CODE
Up to €50,000 ........................................................................ 1 €50,001 - €100,000 ................................................................ 2
€100,001 - €500,000............................................................... 3 €500,001 - €1m ...................................................................... 4 €1,000,001 - €2m ................................................................... 5 €2,000,001 - €5m ................................................................... 6 €5,000,001 - €10m.................................................................. 7 €10,000,001 - €20m ............................................................... 8 €20,000,001 - €50m ............................................................... 9 €50m+ .................................................................................... 10 CLOSE Refused/don't know (DNRO) ................................................ 99 GO TO Q.2b
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ASK Q.2b FOR ALL REFUSED/ DON’T KNOW AT Q2.a1 Q.2b For this survey we need to ensure we are interviewing companies with a turnover of less than
€50million. Can you clarify whether your turnover is within the following bands?
READ OUT – SINGLE CODE
Less than or equal to €2m ...................................................... 1 Between €2,000,001m and €10m ...........................................2 Between €10,000,001m and €50million .................................3 Above €50million.................................................................... 4 CLOSE Refused/don’t know (DNRO) ..................................................5 CLOSE
ASK ALL Q.3 How many years has your business been in operation? _______ years (MIN-MAX 0-999) Q.3b Does your business perform any of the following tasks?
READ OUT - MULTI CODE
Maintain regular management accounts .......................................... 1 Maintain an existing business plan ................................................... 2 Estimate cashflow requirements for the coming months.................. 3 None of these (DNRO) ...................................................................... 4
Q.5 In the last 6 months, i.e. from April 2016 – September 2016, has the turnover of your business increased, decreased or stayed the same compared to the previous 6 month period?
SINGLE CODE
Increased ............................................................................... 1 GO TO Q.5a Decreased .............................................................................. 2 GO TO Q.5b
Remained the same ............................................................... 3 GO TO Q.5c ASK Q.5a FOR ALL WHOSE TURNOVER HAS INCREASED AT Q5 Q.5a By about what percentage has your turnover increased?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE _______% (MIN-MAX 1-9999)
IF REFUSED, ASK THE FOLLOWING: By what percentage has your turnover increased as per the following
bands:
READ OUT - SINGLE CODE
0 – 9% ................................................................................................ 1 10 – 19%............................................................................................. 2 20 – 29%............................................................................................. 3
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30 - 39%.............................................................................................. 4 40 – 49%............................................................................................. 5 50%+ ................................................................................................. 6 Not sure (DNRO) ............................................................................... 7
ASK Q.5b FOR ALL WHOSE TURNOVER HAS DECREASED AT Q5 Q.5b By about what percentage has your turnover decreased?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE _______% (MIN-MAX 1-100)
IF REFUSED, ASK THE FOLLOWING: By what percentage has your turnover decreased as per the following
bands:
READ OUT - SINGLE CODE
0 – 9% ................................................................................................ 1 10 – 19%............................................................................................. 2 20 – 29%............................................................................................. 3 30 - 39%.............................................................................................. 4 40 – 49%............................................................................................. 5 50%+ ................................................................................................. 6 Not sure (DNRO) ............................................................................... 7
ASK ALL Q.5c In the last 6 months, i.e. from April 2016 – September 2016, has your company made a profit, broke even,
or made a loss?
READ OUT - SINGLE CODE
Made a profit.......................................................................... 1 Broke even.............................................................................. 2 Made a loss ............................................................................ 3 Refused .................................................................................. 4 Not sure (DNRO).................................................................... 5 ASK ALL Q.6 In the last 6 months, i.e. from April 2016 – September 2016, has your number of staff increased,
decreased or stayed the same? SINGLE CODE
Increased ............................................................................... 1 GO TO Q.6a Decreased .............................................................................. 2 GO TO Q.6b
Remained the same ............................................................... 3 GO TO Q.7
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ASK Q.6a FOR ALL WHOSE STAFF HAS INCREASED AT Q6 Q.6a By about what percentage has your staff increased?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE _______% (MIN-MAX 1-9999)
IF REFUSED, ASK THE FOLLOWING: By what percentage has your staff increased as per the following
bands: READ OUT - SINGLE CODE
0 – 9% ................................................................................................ 1 10 – 19%............................................................................................. 2 20 – 29%............................................................................................. 3 30 - 39%.............................................................................................. 4 40 – 49%............................................................................................. 5 50%+ ................................................................................................. 6 Not sure (DNRO) ............................................................................... 7
ASK Q.6b FOR ALL WHOSE STAFF HAS DECREASED AT Q6 Q.6b By about what percentage has your staff decreased?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE _______% (MIN-MAX 1-100)
IF REFUSED, ASK THE FOLLOWING: By what percentage has your staff decreased as per the following
bands: READ OUT - SINGLE CODE
0 – 9% ................................................................................................ 1 10 – 19%............................................................................................. 2 20 – 29%............................................................................................. 3 30 - 39%.............................................................................................. 4 40 – 49%............................................................................................. 5 50%+ ................................................................................................. 6 Not sure (DNRO) ............................................................................... 7
ASK ALL Q.6c Which of the following statements best applies to your company? READ OUT - SINGLE CODE The company is struggling to survive The company is focusing on stabilising the business after some tough years Our focus is on stabilising the business but we are also pursuing smaller growth opportunities Our focus is on rapid growth Other, please specify: _________________ (DO NOT READ OUT)
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ASK ALL Q.7 In the last 6 months, i.e. from April 2016 – September 2016, have you sought professional advice
regarding your financing requirements? By professional advice we are referring to advice from auditors, accountants or professional financial advisors.
SINGLE CODE
Yes ......................................................................................... 1 No .......................................................................................... 2 Q.7b In the past 6 months, i.e. April 2016 – September 2016, has the average number of days within which you
pay your suppliers increased, decreased or stayed the same? SINGLE CODE
Increased ............................................................................... 1 Decreased .............................................................................. 2 Remained the same ............................................................... 3 Don’t know ............................................................................ 4 Q.7c In the past 6 months, i.e. April 2016 – September 2016, has the average number of days within which your
customers pay you increased, decreased or stayed the same? SINGLE CODE
Increased ............................................................................... 1 Decreased .............................................................................. 2 Remained the same ............................................................... 3 Don’t know ............................................................................ 4 Q.7d Approximately, how much is the total outstanding debt that your company holds?
€________ (MIN-MAX 1-99,000,000, ALLOW REFUSAL/NOT SURE)
ASK Q7E IF MORE THAN €0 AT Q7D Q.7e What is the average cost/interest rate that you pay on this outstanding debt?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE, IF RATES/COSTS ARE
DIFFERENT ACROSS LOAN TYPES, ASK FOR THE AVERAGE ACROSS THE TOTAL
________% (MIN-MAX 0-99, ALLOW REFUSAL/NOT SURE)
SECTION 2 – FINANCING YOUR BUSINESS
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Q.7g In the last 6 months, i.e. April 2016 – September 2016, have you missed any repayments on your loans, if you have any? SINGLE CODE
Yes ..................................................................................................... 1 No ...................................................................................................... 2 Don’t know (DNRO) ........................................................................... 3
ASK ALL WHO ANSWER YES IN Q.7G, I.E. HAVE MISSED REPAYMENTS ON LOANS Q.7h Which of the following best describe how you have dealt with these missed repayments? READ OUT We have re-structured the loans with the creditor We have paid the balance without any need for re-structuring The balance is still outstanding without any re-structuring Other, please specify: ________________ (DO NOT READ OUT) ASK ALL Q.8 With what bank is your main business account? SINGLE CODE
AIB ...................................................................................................... 1 Bank of Ireland .................................................................................. 3 Danske Bank ....................................................................................... 5 Ulster Bank ........................................................................................ 6 Permanent TSB .................................................................................. 7 Rabobank .......................................................................................... 8 ACC ..................................................................................................... 9 GE Capital/ Woodchester .................................................................. 10 KBC .................................................................................................... 11 Other financial institution (specify) ____________________ ......... 12 Don’t know ........................................................................................ 13
Q.8a For how many years have you been a customer of this bank?
________ years (MIN-MAX 0-999, ALLOW REFUSAL/NOT SURE) Q.9 In the last 6 months, i.e. from April 2016 – September 2016, have you requested from any bank, any of
the following types of finance? It does not matter if you have been successful or not. READ OUT - MULTICODE
New overdraft ........................................................................................ 1 Renewal/restructuring of existing overdraft......................................... 2 New Loan............................................................................................... 3 Renewal/restructuring of existing Loan ................................................ 4
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Invoice Discounting ............................................................................... 5 Leasing or Hire Purchase....................................................................... 6 Bonds (bank backed, advance payment of other bonds)....................... 7 Other (specify) ____________________________ ............................... 8
None ................................................................................................. 9 GO TO Q.9b INTERVIEWERS: IF MORE THAN ONE REQUEST FOR ONE PARTICULAR TYPE OF FINANCE, ASK ABOUT MOST
RECENT. ASK Q.9b FOR ALL WHO ANSWERED ‘NONE’ AT Q.9, THEN CONTINUE TO Q.16B
Q9b Why did you not apply for bank finance in the last 6 months, i.e. from April 2016 – September 2016? MULTICODE, PROBE FULLY, DO NOT READ OUT.
Didn’t need it .............................................................................................. 1
Existing finance product in place ………………................................................ 2 Prefer not to borrow.................................................................................... 3 Not the right time given the economic climate........................................... 4 Inability to repay/meet requirements of finance........................................ 5 Use/raise personal funds when needed...................................................... 6 Going out of business ………………................................................................. 7 Raise finance from grants………………............................................................ 8 Too expensive to borrow………………............................................................. 9 Raise finances from investors/venture capital............................................. 10 Belief that banks are not lending.................................................................. 11 Possible rejection.......................................................................................... 12 Have been turned down before.................................................................... 13 Application process too difficult................................................................... 14 Don’t trust the banks.................................................................................... 15 Too many terms and conditions................................................................... 16 Banks take too long to make decision.......................................................... 17 Existing debt burden already too high.......................................................... 18 Other, please specify: ______________________________
ASK Q.10 OF MOST RECENT FINANCE REQUEST AT Q.9
Q.10 From which bank did you request______________ (FROM Q.9)? SINGLE CODE
AIB …................................................................................................... 1 Bank of Ireland …............................................................................... 3 Danske Bank…..................................................................................... 5 Ulster Bank …..................................................................................... 6 Permanent TSB …............................................................................... 7 Rabobank …....................................................................................... 8 ACC….................................................................................................. 9 GE Capital/ Woodchester …............................................................... 10 KBC …................................................................................................. 11 Other financial institution (specify) ____________________ …...... 12
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Don’t know …..................................................................................... 13 Q.11 I’m now going to ask you about your _______________ (FROM Q.9) request. Which, if any, of these, were
reasons for making your ____________ (FROM Q.9) request? READ OUT – MULTICODE
New business venture …........................................................................ 1 Expansion…............................................................................................ 2
Decline in business revenues …............................................................... 3 Slow down in debtor collection…........................................................... 4 Bad debts increasing …............................................................................ 5 Increase in supplier costs …..................................................................... 6 Property related loan …........................................................................... 7 Working capital/cash flow …................................................................... 8 Purchase, replacement or lease of new vehicle and/or equipment……… 11
Need to restructure loan/credit …............................................................ 12 Acquisition of assets ….............................................................................. 13 Other (specify) __________________________...................................... 14
Q.11b In what month did you apply for __________ (FROM Q.9)? SINGLE CODE
April 2016 …....................................................................................... 1
May 2016….................................................................................. 2
June 2016…................................................................................... 3
July 2016…....................................................................................... 4
August 2016…..................................................................................... 5
September 2016….................................................................................. 6
Cannot recall/don’t know …................................................................... 7 ASK Q.11c FOR ALL WHO ANSWERED CODES 1, 3, 5, 6, 7, 8 @ Q.9 Q.11c What was the value of the __________ (FROM Q.9) for which you applied?
OPEN END: INSERT AMOUNT
Don’t know …........................................................................................... 8
Refused …................................................................................................ 9 ASK Q.11d FOR ALL WHO ANSWERED CODES 2 OR 4 @ Q.9 Q.11d What was the additional value of the __________ (FROM Q.9) for which you applied? OPEN END: INSERT AMOUNT INTERVIEWERS PLEASE INSERT ZERO WHERE RESPONDENT HAS NOT RECEIVED ANY ADDITIONAL
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FUNDS, BUT HAS RESTRUCTURED THEIR EXISITING LOAN OR OVERDRAFT INSTEAD.
Don’t know .............................................................................................. 8
Refused ................................................................................................... 9
Q.11e Thinking of your application for __________, what kind of collateral (e.g. land, buildings, machinery, your
home, etc.) was required, if any? Probe fully: What other collateral? Any other collateral? MULTIPLE ANSWER ALLOWED
Land……………………….............................................................. 1 Buildings................................................................................ 2
Machinery and equipment including movables.................... 3 Accounts receivable……………................................................. 4 Inventories……………............................................................... 5 Personal assets of owner (house, etc.).................................. 6 Other (specify) __________________________ ................... 7 None……………………………………………………………………………………. 8
ASK Q.11f if any collateral in Q.11e (NOT CODE 8 AT Q.11e) Q.11f What was the approximate value of the collateral required as a percentage of the loan value?
INTERVIEWER: IF RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE.
________% (MIN-MAX 0-100, ALLOW REFUSAL/NOT SURE) Q.12 Did you make a formal request, an informal request or both, when applying for __________? (FROM Q.9) SINGLE CODE
Informal request ........................................................................................ 1 GO TO Q.12a Formal application (i.e. filling out formal application form which is assessed internally
by the bank or signing a formal document which the bank prepared for you) ................... 2 Both ...................................................................................................................................... 3 Other (specify) ______________________ ......................................................................... 4
ASK ALL CODE 1 ‘INFORMAL REQUEST’ AT Q.12 Q.12a What were the reasons for not making a formal application? OPEN END: PROBE FULLY
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Q.13 From the date of application, how long did it take the bank to process your _____________ (FROM Q.9)
request and give a final answer? SINGLE CODE
Less than one week ............................................................... 1 Up to 2 weeks ........................................................................ 2 Up to 3 weeks ........................................................................ 3 Up to 4 weeks ........................................................................ 4 Between 5 – 12 weeks ........................................................... 5 More than 12 weeks .............................................................. 6 Still pending ........................................................................... 7 GO TO Q.13A
Cannot recall/don't know ...................................................... 9 IF STILL PENDING CODE 7 AT Q.13 Q.13a Has your bank asked you for additional information which you have not yet supplied e.g. accounts etc.? Yes.......................................................................................... 1 GO TO Q.16B No .......................................................................................... 2 GO TO Q.16B Don’t know………………………………………………………………………… 3 GO TO Q.16B Q.14 Were you successful in your_____________ (FROM Q.9) request? SINGLE CODE
Yes.......................................................................................... 1 GO TO Q 14.a2 No .......................................................................................... 2 GO TO Q 14.b
Partially .................................................................................. 3 GO TO Q 14.a1 ASK Q.14a1 IF PARTIALLY SUCCESSFUL - CODE 3 AT Q.14 Q. 14a1 What % of your application was partially approved? > 70% of the value applied for ................................................ 1 GO TO Q 14.a2 < 70% of the value applied for ................................................ 2 GO TO Q 14.a2 Don’t know.............................................................................. 3 GO TO Q 14.a2 ASK Q.14a2 TO ALL SUCCESSFUL (CODE 1 AT Q.14) OR PARTIALLY (CODE 3 AT Q.14) AND >70% (CODE 1
AT Q.14A1) SUCCESSFUL IN APPLICATION AT Q14 Q.14a2 Were any of the following criteria/conditions attached to your ___________ (FROM Q.9) request?
READ OUT - MULTICODE
Requirement to provide regular management accounts/debtors + creditors’ listings to the bank … 1
Different finance structure granted to that requested ..................................................................... 2 Personal guarantee ........................................................................................................................... 3 Specific security ................................................................................................................................. 4 Facility fee......................................................................................................................................... 5 Security fee ....................................................................................................................................... 6
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Other fees (arrangement or other) ................................................................................................... 7 Requirement to maintain account with bank..................................................................................... 8 Requirement to convert overdraft to term loan ............................................................................... 9 Additional collateral ......................................................................................................................... 10 Requirement for borrower to put up cash ....................................................................................... 11 Other pre drawdown conditions ...................................................................................................... 12 Other (specify) _______________________________.................................................................... 13 No ...................................................................................................................................................... 14 GO
TO Q.16 ASK Q.14a3 TO ALL SUCCESSFUL / PARTIALLY SUCCESSFUL IN APPLICATION AT Q14 (CODE 1 / 3 AT Q.14) Q.14a3 What is the average interest rate attached to your ___________ (FROM Q.9) request? INTERVIEWER: IF
RESPONDENT IS UNSURE, ASK FOR HIS/HER BEST ESTIMATE.
________% (MIN-MAX 0-99, ALLOW REFUSAL/NOT SURE) ASK Q.14B TO ALL UNSUCCESSFUL IN APPLICATION (CODE 2 AT Q.14) OR PARTIALLY < 70% (CODE 2 AT Q.14A1) IN APPLICATION Q.14b Were any of the following reasons given by the bank for turning down your ___________ (FROM Q.9)
request?
READ OUT - MULTICODE
Inadequate repayment capacity ....................................................................................... 1 Account performance/history ........................................................................................... 2 Inadequate historic information provided......................................................................... 3 Deterioration in business financial performance ............................................................. 4 Change in bank lending policy ........................................................................................... 5 Change in bank pricing policy ........................................................................................... 6 The sector in which your business operates is no longer a sector to which the bank are
prepared to lend................................................................................................................. 7
The business which you are operating, is no longer a type of business to which the bank
Is prepared to lend.............................................................................................................. 8
Requested facility was sanctioned at lower level/different structure to that requested 9 Existing debt burden already too high.........................…………………………………………………… 10 Inadequate/insufficient security ...................................................................................... 11 Other (specify) ______________________________ ....................................................... 12 No reason given ................................................................................................................ 13 None of these ................................................................................................................... 14
ASK Q.14c IF CODES 1-12 AT Q14b Q.14c Did you agree with the reasons that the bank gave you for turning down your application___________
(FROM Q.9) your request?
SINGLE CODE Yes ......................................................................................................... 1 No ........................................................................................................... 2 To some extent ....................................................................................... 3
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ASK Q.14d TO ALL WHO WERE UNSUCCESSFUL CODE 2 AT Q.14 Q.14d Did the bank inform you of your right to an internal review of the decision to refuse credit? SINGLE CODE
Yes .................................................................................................... 1 No ...................................................................................................... 2 Don’t know (DNRO) ........................................................................... 3
ASK Q.14e ONLY IF CODES 1 (AIB) OR 3 (Bank of Ireland) AT Q.10 Q.14e Did the bank inform you of your right to a review of the decision to refuse credit by the Credit Review
Office? SINGLE CODE
Yes .................................................................................................... 1 No ...................................................................................................... 2 Don’t know (DNRO) ........................................................................... 3
ASK Q.15 TO ALL WHO HAD CRITERIA ATTACHED (CODES 1-13) AT Q14a2 Q.15 Did any of these criteria/conditions prevent you from availing of the sanctioned facility? SINGLE CODE
Yes .................................................................................................... 1 No ...................................................................................................... 2
ASK Q.16 TO ALL SUCCESSFUL/PARTIALLY SUCCESSFUL AT Q.14 Q.16 Have you availed of all or part of the facility or not availed of the facility? SINGLE CODE
Yes, I have availed of all of the facility .................................... 1 Yes, I have availed of part of the facility ................................. 2 No, I have not availed of the facility ....................................... 3 GO TO Q.16a
ASK Q.16a TO ALL WHO HAVE NOT AVAILED OF FACILITY AT Q16 Q.16a What are the reasons for not availing of the facility to date? MULTICODE ALLOWED – PROBE FULLY
Didn't need it ...................................................................................... 1
Have sufficient internal funds/reserves ............................................. 2
Waiting for Approval .......................................................................... 3
Too much collateral required ............................................................. 4
Disagree with terms & conditions ...................................................... 5
Other Specify _______ ....................................................................... 6
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ASK ALL Q.16b Do you expect to seek bank finance for your business in the next 6 months (i.e. from October 2016 –
March 2017)? SINGLE CODE
Yes ..................................................................................................... 1 No ...................................................................................................... 2 GO TO Q16C
Don’t know (DNRO) ........................................................................... 3 ASK Q.16c if NO AT Q.16b Q.16c Why will you not be seeking bank finance/further bank finance in this period? MULTICODE ALLOWED – PROBE FULLY
Don’t need it ....................................................................................... 1 Have sufficient internal funds/reserves ............................................. 2 Prefer not to borrow .......................................................................... 3 Existing finance products/restructures are already in place .............. 4 Inability to pay/meet requirements of bank finance ......................... 5 Don't trust the banks/believe they are not lending ........................... 6 Application process for bank finance is too difficult .......................... 7 Can raise finance from other non-bank sources ................................ 8 Other Specify _______ ....................................................................... 9 No Reason .......................................................................................... X
ASK ALL Q.16d Thinking about your bank debt, have any of the following adjustments been put in place in the last six
months i.e. from April 2016 – September 2016? READ OUT - MULTI CODE
Arrears Capitalisation ............................................................. 1 Capital Moratorium ................................................................. 2 Interest Moratorium ................................................................ 3 Interest Rate Reduction ........................................................... 4 Payment Rescheduling ............................................................. 5 Term Extension ......................................................................... 6
Other…………………………………………………………………………………….. 7 I don’t have any bank debt……………………………………………………. 8 No adjustments made…………………………………………………………… 9
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Q.17a Which of the following Government support initiatives are you aware of?
READ OUT - MULTICODE
Supporting SMEs Online Tool……………………………………………………………… 1 Credit Guarantee Scheme....................................................................... 2 Microfinance Loan Fund Scheme............................................................ 3 Enterprise Ireland……………………………………………………………………………….. 4 Local Enterprise Offices (LEO’s)…………………………………………………………… 5 Strategic Banking Corporation of Ireland (SBCI)…......................………….. 6
Other government support (specify) ____________________ …………... 7 None………………………………....................................................................... 8
We would now like you to think about the most recent period from April 2016 – September 2016 again.
Q.17b Did you enquire about any of the following types of non-bank finance? READ OUT – MULTICODE ONLY SHOW CODE 1-3 IF ANSWERED IN Q17A
Credit Guarantee Scheme.............................................……………………….. 1 Microfinance Loan Fund Scheme............................................................ 2 Other government financial support (specify) _____________.............. 3 Venture Capital Finance ......................................................................... 4 Business Angel or Investor Finance......................................................... 5 Loans from Family or friends................................................................... 6 Equity from Family or friends.................................................................. 7 Loans from business partners................................................................. 8 Equity from business partners ............................................................... 9 Crowd funding/Peer-to-Peer lending...................................................... 10 Non-bank invoice finance related facilities…………………………………………. 11 Non-bank asset finance related facilities…………………………………………..… 12 Other non-bank finance (specify) ____________________ ....……….…… 13 None (DNRO) ........................................................................………………. 14 GO TO Q.18b ASK Q.18/Q18a FOR ALL NON-BANK FINANCE OPTIONS IN Q17b Q.18 Were you successful, partially successful, or unsuccessful in obtaining finance from __________ (FROM
Q.17) or is the decision still pending?
SINGLE CODE Yes............................................................................................. 1 No ............................................................................................. 2 Partially .................................................................................... 3 Still pending .............................................................................. 4
SECTION 3 – NON BANK FINANCING
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ASK Q.18a FOR ALL NON-BANK FINANCE OPTIONS IN Q17b Q.18a I’m now going to ask you about your _______________ (FROM Q.17b) request. Which, if any of these,
were reasons for making your ____________ (FROM Q.17b) request? READ OUT - MULTICODE
New business venture/expansion/purchase assets or equipment…..1 Working capital requirements……...................................................... 2 Property related loan………………………………………………………………........ 3 Need to restructure loan/credit..........................................................4 Other (specify) ____________________ ....………………………………….…5 ASK Q.18a1 FOR THOSE WHO DID NOT APPLY FOR ANY GOVERNMENT FINANCIAL SUPPORT (NOT CODE
1, 2, 3 IN Q.17b) Q.18a1 Why did you not apply for Government financial support in the last 6 months? MULTICODE, PROBE FULLY, DO NOT READ OUT
Don’t want to lose control of business................................................... 1 Costs/Fees are too high …………….……….................................................. 2
Terms and conditions too onerous...………............................................. 3 Lack of knowledge…............................................................................... 4
Used in past but not currently relevant ….............................................. 5 Previously rejected for this type of finance........................................... 6 Application process too difficult …….................................................... 7 I don’t believe this source is relevant for my business or sector........... 8 Don’t need this type of financing……….................................................. 9 Already have this type of financing in place so do not need more…….. 10 Other (specify) ………………………………….................................... …………… 11 ASK ALL Q.18b Over the last six months (i.e. from April 2016 – September 2016), please estimate the proportion of this
establishment’s working capital that was financed from each of the following sources? (MUST ADD TO 100%)
Percent Sources of Working Capital
a. Internal funds/Retained earnings %
b1. Purchases on credit from suppliers %
b2. Purchases on advances from customers %
c. Borrowed from banks %
d Borrowed from non-bank financial institutions %
e. Owners’ contribution %
f. Other (informal lenders, friends, relatives, etc.) %
None of these (DNRO)
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ASK ALL Q.18b1 Over the last six months (i.e. from April 2016 – September 2016), if the company acquired fixed assets,
could you please provide an estimate of the total expenditure?
€________ (MIN-MAX 1-99,000,000, INCLUDE: NO ACQUISITION, REFUSED)
ASK ALL WHO HAVE NOT ANSWERED “NO ACQUISITION” IN Q.18b1 Q.18c Over the last six months (i.e. from April 2016 – September 2016), please estimate the proportion of this
establishment’s purchase of fixed assets that was financed from each of the following sources? (MUST ADD TO 100%)
Percent Sources of Investment
a. Internal funds/Retained earnings %
b. Owners’ contribution %
c. Issued new equity shares %
d. Issued new debt (including commercial paper and debentures) %
e. Borrowed from banks %
f. Borrowed from non-bank financial institutions %
g1 Purchases on credit from suppliers %
g2 Purchases on advances from customers %
h. Leasing arrangements %
h. Loans from friends and relatives %
h. Other (including informal loans) %
None of these (DNRO) %
Does not apply %
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Q18d During the past six months, April 2016 – September 2016, did your enterprise introduce any of the following? READ OUT - MULTICODE
New or significantly improved goods……………………………………………………………… 1
New or significantly improved services…………………………………………………………. 2
New or significantly improved methods of production of goods or services, distribution methods, or support activity for your goods or services…………………………………………………………………………………………………………
3
New business practices, new methods of organising work responsibilities and
decision-making, or new methods of organising external relations with other firms
or public institutions………….............................................................................
4
New marketing concepts or strategy…………………………………………………………… 5
ASK ALL Q.19a Is the turnover of your business seasonal in nature?
SINGLE CODE Yes......................................................................................... 1 GO TO Q.19b No .......................................................................................... 2 GO TO Q.24a Q.19b As a result of the seasonal nature of your business turnover, is your demand for credit also seasonal in
nature? SINGLE CODE Yes......................................................................................... 1 GO TO Q.24a No .......................................................................................... 2 GO TO Q.24a
SECTION 4 – SEASONALITY
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ASK ALL Q.24a Are you aware of the existence of the Credit Review Office which can assist borrowers who have been
refused credit by AIB, Bank of Ireland, Ulster Bank and Permanent TSB?
SINGLE CODE Yes......................................................................................... 1 No .......................................................................................... 2 ASK ALL Q.24c In your view are the banks currently lending to Irish SMEs?
SINGLE CODE Yes, to a small number of SMEs.................................. 1 Yes, to a large number of SMEs.................................. 2 No............................................................................... 3 Don’t know ................................................................ 4 IF NO CODE 2 AT Q.24C Q.24d (i) And in your opinion, what is the main reason for this view?
READ OUT - SINGLE CODE
The experience of your business in the last 6 months (i.e. from April 2016 – September 2016) of applying for credit and either being rejected or being partially rejected……………………………………… 1
The experience of your business peers in the last 6 months (i.e. April 2016 – September 2016) of applying for credit and either being rejected or being partially rejected……………………………………….. 2
Media reports on SME lending in the last 6 months (i.e. from April 2016 – September 2016) ……………………......................................... 3
Statements by business representative organisations in the last 6 months (i.e. from April 2016 – September 2016) …………………………………………………………… 4
SECTION 5 – AWARENESS
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ASK ALL Q.24d (ii) I would now like to read out a list of opinions stated by other companies. On a scale of 1 to 5 where 1 is
disagree strongly and 5 is agree strongly, how much do you agree or disagree with each statement?
SINGLE CODE
I feel I have a good knowledge of state funded
support available to my business …………………………………………………………………….. 1 There should be more information available on how
businesses like mine can get state funded support …………………………………………. 2 I think the business climate in Ireland will improve in the next 6 months ……….. 3
I think Brexit will have a positive impact on my business/ ……. …………………………4
Q.25 Can you confirm the county in which is your main office based?
SINGLE CODE
List 32 counties
Thank you for responding to this survey for the Department of Finance. The composite results will be published
by the department and freely available later in the year.
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