Irish Small Businesses At Risk As Credit Availability Dries Up

by Jason Gorringe, Tax-News.com, London

01 May 2009

An overwhelming majority of Irish businesses are experiencing serious difficulties in accessing finance from credit institutions according to a survey of chartered accountancy firms conducted by the Institute of Chartered Accountants in Ireland (ICAI).

The headline findings of the ICAI survey are:

• Over 97% of accounting firms clients have experienced difficulties securing finance;
• Over 78% of accounting firms believe those difficulties to be in excess of what might be reasonable in the current economic circumstances;
• Difficulties concern both working capital finance and finance for once off projects with overdraft extensions being a primary concern;
• 75% say their client companies are dissatisfied with the communications they receive from their banks;
• Over 79% feel their companies do not understand the criteria for decisions being applied by banks;
• 90% indicated they are supplying more information on behalf of clients pursuing credit applications;
• 80% indicate the availability of credit has reduced significantly;
• 62% believe credit has become more expensive despite interest rate reductions;
• 97% say terms of have become more restrictive;
• At a technical level over 92% of respondents report increased usage of ‘emphasis of matter’ paragraphs in audit reports is increasing and over 97% indicated that ‘going concern’ issues are of more concern this year than last year.

According to ICAI Technical Director, Aidan Lambe, “This survey of accountancy firms - the people working with a wide range of clients across all sectors - confirm the anecdotal evidence that a lack of credit is a significant issue for our economy. Clearly, the extent of the challenge facing both the government and the banking sector remains considerable.”

“Two thirds of firms express scepticism that the government’s recapitalisation plan will deal with the issue. However, there is some better news for the government with over 70% supporting the Government’s proposal to establish a National Asset Management Agency. However, the urgency of the current situation cannot be overstated."

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