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Loans to SMEs see biggest drop since 2011

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Loans to small and medium sized businesses have fallen by their biggest amount since the low point of the last recession.

Figures from the Central Bank show a net decline in core business loans of €1.4 billion in the third quarter of this year – the largest quarterly fall since the first quarter of 2011.

On an annual basis, credit has fallen by 7.9% – the largest annual decrease since the third quarter of 2012.

Core business loans are for non-financial and non-property purposes. Small and medium sized enterprises (SMEs) are those employing fewer than 250 people with sales of less than €50m a year.

The Central Bank figures show that the weighted average interest rate on outstanding loans to SMEs stood at 3.49% in the third quarter. It fell 0.13% over the quarter and 0.04% over the year.

Repayments exceeded new lending by €1.1 billion in the year to the end of September, the Central Bank figures show.

The total amount of outstanding loans to Irish resident businesses – both SMEs and large enterprises – amounted to €72.3 billion at the end of September. This was the lowest level of outstanding credit since the bank began compiling this series.

Conversely, total deposits held by businesses grew by €6.2 billion in the third quarter and by €20.6 billion in the year to the end of September to mark the largest annual increase ever recorded.

Comment: However the Central Bank doesn’t go into detail as to the reasons lending fell. SME’s were not trading and therefore were simply not in a position to take up a loan. Some SMEs didn’t know if they would ever open so committing to a loan from a Bank or any institution was not possible. Also from speaking with many SMEs over the last few months we also found that the banks were simply not lending and were refusing a large number of SMEs finance.


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