SME Rejection Rates on the Rise Despite Growth in Lending

Highs and lows across all sectors overall lending has risen by about 32% in the first Quarter of 2017, but even so the stock of SME credit declined to €16.6bn in the first Quarter of the year. Not only that, but the rejection rate on bank finance applications increased from 11% to 13%.

Also, while the rates have dropped slightly for medium-sized businesses, it has increased for small and micro firms. However, there is some good news for the wholesale and retail sectors, as they experienced strong growth thanks to new lending reaching €3.6bn in Quarter one of 2017.

Reasons for taking out a loan?
Many SMEs apply for a loan in order to invest in their business, or simply for working capital. Right now the average interest rate stands at 5%for loans under €250,000.

Default Rates
According to the Central Bank of Ireland loan data for last December, about 18.7% of SME loans are in default with the construction, hotels and restaurant sectors having the highest rate. That said, the sector with the lowest default rates is the social and personal sectors.

Regionally there is also a difference in default rate, with the highest being in the West and the lowest in the South-West.

What can you do?
Considering how high the rejection rate is with bank applications, it is understandable to be worried if you need to apply for a loan. Maybe your café needs a new coffee machine, or you want to expand your business? The best solution is to shop around for alternative options, such as online capital platforms. One online capital platforms that stands out is GRID Finance. Why? Well once you have filled out a loan application, they send you a GRID Score. This is a credit score that will help you understand how you finances are doing and if you should focus more on your cash flow. Too many Irish SMEs don’t know their credit score and this can work against them when applying for a loan.

What makes GRID Finance different than a Bank?
Well with GRID Finance your repayments will come out of your card machine, so you only pay when you have the money coming in. They offer both a cash advance and a term loan so you’ll find something that suits your needs. You simply apply by phone or email, submit your accounts and statements then wait to get funded. The process should only takes about a week.

Not all doom and gloom!
While it is easy to become disheartened by the facts of bank financing, it is important to remember that there are other options out there. Do your research and ask a financial adviser for advice on the topic. Don’t give up just because you see that the banks have decreased lending or increased interest rates. Take charge and get that new coffee machine, or expansion loan. Check out GRID Finance today.

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