“Many good businesses may be forced to close as result” – Michael Tunney, Chair, CEB Network

Just under half of all respondents (49%) felt that credit availability was worse than six months according to the second half yearly survey carried out by the County and City Enterprise Boards (CEBs) – the 35 bodies across the country who provide support for small businesses (‘micro-enterprises’) with 10 employees or less.  A significantly higher proportion of respondents to the survey said they had been refused additional credit than six months previously (47% Vs 40% in previous survey).  The proportion who said they had succeeded has fallen slightly from the previous survey (27% Vs 29% in previous survey). 

The current banking situation is having a serious effect on CEB clients’ trading and business operations with half of respondents indicating that it was either serious or very serious (50% combined).  34% of respondents to this survey indicated that their business was at risk of closure a higher figure than the last survey (31%). 

How Business Being Curtailed

Commenting on the survey, Michael Tunney, Chairperson of the CEB Network said,  “The survey of our CEB client businesses highlights a number of key issues – the significant cash flow difficulties with which many businesses have to work with and the continuing lack of access to overdraft and loan facilities form the banks.

“Over 76% of the businesses who felt they were being curtailed by banking restrictions indicated that they were experiencing restrictions with regard to bank loans and overdraft facilities and a similar number of businesses indicated that they were experiencing increased debtor days. With customers and suppliers holding on to cash for as long as possible and limited working capital available from the banks many businesses are struggling to meet day to day costs. If the situation continues many good businesses will be forced to close as a result.

With 96% of the respondents indicating that the situation  with regard to credit availability being either the same or worse than 6 months ago and less than 29% indicating that they had been successful in accessing additional credit facilities from the banks the issue of some alternative interim micro- credit scheme for small businesses should be looked at. The Boards have been working on a proposal based on the successful schemes in operation in the Border counties for the last 20 years through the County Enterprise Funds and if a source of external money could be identified a pilot scheme could be developed before the end of the year.”

Asked in the survey whether employment was at risk in their enterprise 35% said they had already let staff go, 18% said staff were at risk over the next six months while 8% said they are currently intending to reduce staff. Just two fifths of respondents said that employment was not at risk (39%).

The online survey had a response of 1,076 CEB clients during June 2009 and the responses were analysed by the CEB Central Coordination Unit (CCU) of Enterprise Ireland.  The main objective of this survey was to ascertain the difficulties arising from the credit crunch and what changes, if any, there were from the previous study taken in November/December 2008.

Over half of respondents expressed the view that their business was curtailed by banking restrictions and this had deteriorated since the last survey.  The most common means of curtailment were

• bank overdraft/bank loan restrictions, also
• additional charges,
• no processing of loans (big jump)
• higher levels of security demanded

It is significant that arising from the shortage of bank credit that businesses are turning to other sources of credit including credit unions, CEBs and private investors.

Secured Credit from Other Sources

Respondents were asked if a small loan scheme operated by the CEBs up to €20,000 to support viable business and its working capital needs would be helpful and desirable.  Figure 11 highlights the findings. The vast majority of respondents indicated that this proposed scheme would be of interest, at 84%.  This was an even higher percentage than those in the previous survey when 81% indicated an interest six months ago (see Fig 12).

Banking Institution Used, December 2008 Vs June 2009