Irish Banks and Buisness Funding

flash harry

ok what are peoples thoughts on this - I was talking to a friend of mine who owns a small business and like most of us, is going through "challenging" times.

He was at a networking event and the ehad of ISME was there and said that in a survey they did like middle of last yr, 20% of applications for funding were turned down; in Decmeber 58%, and more recently 48%. Additionally of those excepted 1 out of 4 of them were subsequently rejected for various reasons. Biggest offender (according to him) was UB.

Funny thing is he was awaiting news of overdraft increase from UB who, yes refused to increase his OD. Not singling them out, I know there's plenty of others doing same.

ISME dude also said on newstalk that all these full page ads saying "open for business" were biggest load of crap, a PR exercise with OUR taxpayers money......

To really clinch my friends dillemma, he has a public sector contract that he needs to have tax clearance to get paid on BUT needs access to working capital to pay the tax to get paid. YES he has told bank this.

Any advice or thoughts???

FH

conolan

Obviously banks have to turn down some applications. Pity they didn't turn down a lot more developer loans. We'd be in far less trouble.
These days loan applications are decided on underwriting criteria (ie. ticking boxes, lenders experience of sector etc.). The days when the bank manager decided on the look of you and the sound of your business are gone. Ducks must be in a row.
Of course, that old chestnut - if you can prove you don't need the loan you'll get it - still applies.

gixerfixer600

As someone working in business lending for one of the big two bank, my experience is that this notion of banks not lending to businesses is a myth.

The vast majority of applications for overdrafts and term loans are still being approved on a case by case basis as per normal. It is up to the business ownwer to show the bank that they can repay the facilities they are seeking. There are applications for credit which are being declined but this would because either the business is not viable or the business owner has damaged their track record through the management of their accounts.

Irish Banks as we all know are guaranteed by the state. Banks have a responsibility to the tapayer to ensure that any funds it gives out will be returned. If banks lend to a business in the current climate, the bank risks total loss which could ultimately be picked up by the taxpayer in a worse case scenario.

Some customers seem to think that because the big two have been recapitalised, this affects lending criteria and entitles them to funds they wouldn't ordinarily qualify for. Most people don't even know that the taxpayer will be getting all the funds back with an annual coupon of 8%. In the current climate, where else would you get an 8% return on an investment.

The simple fact is that businesses are having difficulties getting paid for work they are doig or goods they are supplying. This is severly damaging their cashflow. In the short term banks can give some leeway on the overdraft or term loan but in the end, the business needs to collect from its debtors. Very often customers do not understand the role of their bank and confuse it with the role of an investor.