Neither a borrower nor a lender be
January is often a time of financial uncertainty for many people as the spending sprees of December leave somewhat of a hole in the pockets and we begin to add to our savings once more. The January sales offers a slight boost to the retail sector during this slump, while for the rest of us they tend to have the opposite pocket-emptying effect. Business lending, however seems to be in full swing in 2017 already. As we discussed towards the end of last year, there was to be somewhat of a new focus on lending in the SME (Small and Medium Enterprise) sector, a sector that found itself sorely left behind and without many financing options available to them whether starting up their business or expanding into bigger and better things.
As predicted, lending to the SME sector has been steadily increasing in recent months, rising by over 5% when comparing the 2016 summer months to the same period in 2015. When comparing the summer months of 2015 with those of 2016, lending to SMEs in the manufacturing sector had increased by approx. 37% and the hotel and restaurant sector by approx. 25%. It has also been found that the rate of loan defaults in particular in the SME sector has dropped from 41% in 2013 to 24% in 2016.
As always it is wise to take these positive findings with a pinch of salt for anyone in the SME sector as there currently tends to always be a down side. In the case of the new availability of lending and the increase in same within the SME sector, the double edged sword of lending has also come with a higher cost of credit than most European countries, possibly due in part to the previous lack of availability. Similarly, with the new availability of lending options, rejection rates are also on the increase with the latest Central Bank loan data showing an increase in the rejection rate from 11% to 16%. Interest rates are also showing to be higher on smaller loans so it is advisable to take into account all of your available financing options before making a commitment to one to ensure that you are getting the best deal for your business and also signing up for a financing option which is sustainable for you.
Rachel McGovern of PIBA financial brokers has been quoted as stating that these findings point to an existing lack of competition in Ireland stating that
“More needs to be done to support Irish SME growth, and the state needs an urgent analysis of what is keeping competitive forces out of the Irish lending market.”
As always, we are big supporters of the SME sector and welcome any changes which will assist this sector to grow and flourish. Should you require any help, guidance or advice for your own newfound or burgeoning SME, please don’t hesitate to contact us and we will be delighted to be of assistance.
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~ DCA PARTNERS, DECLAN DOLAN & EAMONN GARVEY