gov - Credit Demand Survey April 2022

The Department of Finance has today published the latest in its series on SME Credit Demand Surveys which covers the period April 2022– September 2022. This survey series is currently being conducted by Behaviour and Attitudes, on behalf of the Department of Finance. It is the most comprehensive survey of SME Credit Demand in Ireland, covering over 1,500 respondents through in-depth discussions. The survey captures a full picture of the SME landscape in Ireland, with micro-enterprises, small-sized enterprises and medium-sized enterprises accurately represented as per the percentage make-up of SMEs in Ireland. The survey is conducted biannually.

Throughout the report, the most recent wave of findings (referred to as September 2022) is compared with corresponding waves. This ensures that historical comparisons are being made on a like-for-like basis, taking any seasonal issues into account.

Key results include:

the number of SMEs that applied for bank credit was 17%
a total of 5% of SMEs applied for non-bank finance
SMEs reported that sufficient internal funds was the reason for not seeking credit for 79% of firms
of all businesses surveyed, 44% reported increased turnover in the six months up to September 2022, with 24% reporting a decrease. The biggest improvement was seen for the hotel and restaurant sector (78%)
during the six months up to and including September 2022,65% of SMEs reported profit compared to 57% in 2021. In 2022, 12% reported a loss while 22% broke even
the average value of a credit application for new finance was €278,915, up notably from €208,469 in September 2021. The average value of applications for renewal/restructuring of existing finance has fallen to €396,419
61% of SMEs increased prices, 96% of which have done so to cover increased input costs
for 34% of SMEs, electricity costs are less than 21% of total energy costs. This is down from 42% on the previous wave. However, for 41% of SMEs, electricity costs are more than 60% of total energy costs. This is up from 32% on the previous wave of the survey
the average Irish SME had outstanding debt of just over €427,000, up from €400,000 on the previous wave
more than half (55%) of all SME outstanding debt was to retail banks, with the balance owed to non-bank bodies. This is down just 1% on the previous wave
overall 40% of SMEs have no debt with construction and business services having the lowest level of debt

On the publication of the SME Credit Demand Survey Minister for Finance Michael McGrath stated:

“I welcome the results of the latest wave of the SME Credit Demand Survey. It enables Government to gain a critical understanding of the Irish SME landscape. This in turn enables Government to develop, refine and implement policy measures to support SMEs that are critical to Ireland’s economic performance and an important source of employment across the country. For example, the survey series has provided an evidence base to help inform Government’s response in supporting SMEs facing rising energy costs and the cost of doing business via the launch of the Temporary Business Energy Support Scheme (TBESS) and the forthcoming launch of the Ukraine Credit Guarantee Scheme (UCGS) and the Growth and Sustainability Loan Scheme (GSLS). I would like to thank the businesses that partook in this survey wave."

SME Credit Demand Survey – April 2022 to September 2022

Íoslódáil

Amharc

Notes

Background of report

The SME Credit Demand Survey has been conducted biannually since 2011 to monitor trends in access to credit by SMEs. Please note while the survey is conducted on a 6 monthly basis, for presentation purposes, the report uses year-on-year comparisons.

The report published today presents the results from the SME Credit Demand Survey April 2022 – September 2022. Conducted by Behaviour and Attitudes, all interviews were conducted between 11 October and 1 December 2022 and covered the period from April 2022 to September 2022.

The department has conducted the SME Credit Demand Survey in order to have an independent and statistically significant report into the Irish SME landscape and the availability of, and demand for, credit that exists for SMEs. The survey was conducted through a telephone survey covering over 1,500 businesses. It drew a carefully constructed sample from a large database of SMEs, made repeated calls to ensure a full response and asked factual questions. The full questionnaire is included in the report. The report and previous reports are available on the Department of Finance website at: SME Credit Demand Surveys.

The results will be used to monitor the sector, identify any changes or emerging trends and to feed into the development of policy options with colleagues in other government departments including Enterprise, Trade and Employment and Agriculture Food and the Marine for Government to consider.

Summary and key findings

This report contains the results of the Department of Finance SME Credit Demand Survey. All interviews were conducted between 11 October and 1 December 2022 and covered the period from April 2022 to September 2022. Throughout the report, the most recent wave of findings (referred to as September 2022) is compared with corresponding waves. This ensures that historical comparisons are being made on a like-for-like basis, taking any seasonal issues into account.

Please note that due to COVID-19 restrictions, no interviewing was possible for the same period in 2020.

Demand for bank finance

17% of SMEs applied for bank finance in the 6 months to September 2022. Credit demand remained unchanged in the six months to September 2022, with 17% of SMEs reported that they applied for bank finance. When this is broken down by firm size, credit demand has increased slightly among micro companies (+1%) and decreased among medium sized companies (-3%). However medium sized companies continue to have the highest level of credit demand at 22%
17% of all SMEs expected to apply for finance in the following six months, up significantly from 7% in September 2021
the main reason stated for not seeking credit in the past six months was that the company had sufficient internal, a reason cited by 79% of business not seeking credit (up from 76% in September 2021)
new loans, and leasing or hire purchase were the main finance products requested by SMEs, followed by new overdrafts
credit demand was highest for the Construction (20%), Wholesale (17%) and Business Services (17%), while lowest for Hotels & Restaurants (13%) and Manufacturing (12%)
the average reported cost of credit on outstanding loans was 5.13% – an increase from 4.59% reported in September 2021
2% of SMEs reported having missed repayments of bank loans in the period – down from 5% in September 2021
5% of SMEs requested traditional finance (for example: leasing or hire purchase, or new loan) from a non-bank provider in the six months up to September 2022. The most common type of non-bank finance requested was leasing and hire purchase (24%), followed by new loan (20%)

The application process

of those companies that requested bank finance, working capital (41%) and business expansion (35%) were cited as the main reasons for making a finance request, followed by investment in machinery or equipment (17%). Compared to September, bank finance requests were down for business expansion, while up for working capital
the average value of a credit application for new finance was €278,915, up from €208,469 in September 2021. The average value of applications for renewal/restructuring of existing finance was €396,419, up notably from September 2021
of those applying for bank finance, 27% had to provide some type of collateral (down from 42% in September 2021), with the main collateral types required being buildings and personal assets. The average value of collateral required as a percentage of the loan was 53%
60% of all finance applications were processed within the stipulated 15 working days of receipt of all information from the company
the average amount of time from application to decision was 26 working days. The proportion of loans that were still pending stood at 9%
the proportion of credit applications declined stood at 10% in September 2022, largely in line with the 9% reported September 2021. But the proportion of requests that was approved fully was down from 86% in 2021 to 83% in 2022. Decline rates were lowest for the Business Services sector at 5%, with the highest decline rates seen for Hotels & Restaurants (17%)
in September 2022, 22% of SMEs that were refused credit reported that they were informed of their right to an internal review – down from 42% in September 2021, with a large proportion (38%) unable to recall whether they were informed of their right to an internal review. Just 26% of those who were refused credit reported that they were informed of their right to a review by the Credit Review Office, with 41% were unsure if they were informed or not. It should be noted these calculations are based on a very small base size of just 29 respondents

SME supports and initiatives

A large majority of SMEs are aware of Enterprise Ireland (90%), Local Enterprise Offices (80%), and the Credit Guarantee Scheme (63%). 44% were aware of the Credit Review Office, and 52% were aware of Microfinance Ireland Supports. Just 5% were not aware of any government support.

Credit Demand Survey April 2022 - September 2022