New lending to small businesses rises but challenges remain - study

The rise has been driven by primary industries and hotels and restaurants (3.7%), with declines in other sectors. It means that non-property related lending to SMEs stood at EUR 16.2 billion as of the end of the first quarter.

The figures also show how a lack of competition in lending means that three lenders accounted for 86% of new lending flows in the first quarter, but this concentration is nonetheless weakening, and has trended downwards since the first quarter of 2016, the Central Bank said.

With new forms of SME finance now available on the market, including peer-to-peer lending and invoice financing, many SMEs are no longer looking for support from their banks. In March, for example, the figures show that Irish SMEs applied for loans and overdrafts at about half the rate of SMEs in comparator countries.

Irish SMEs also face high rejection rates, with a rate of 17% in September 2017, a gradual increase since March 2016, the Central Bank said. “Micro” companies faced the biggest rejection rate, at 28%, compared with 11 and 15% for small and medium-sized firms, respectively.

However, the default rate for SME loans remains high, with the figures showing that as of December 2017 the default rate for SMEs was 22.6%, weighted by loan size.

While venture capital funds raised EUR 994 million in 2017, a fifth of the value of SME bank financing, the Central Bank said this funding was limited to a small number of firms operating in high-technology sectors.