29% of respondents feeling that their businesses were at risk of closure.

58% of micro enterprises ‘more at risk of losing jobs in next six months’

43% of respondents to an online survey conducted amongst clients and contacts of the County and City Enterprise Boards (CEBs), taken during January 2010 to assess the difficulties facing small companies in accessing credit, felt that credit availability is now worse than six months ago. 54% feeling that conditions are the same while just 3% of respondents felt it has improved.

Many respondents consider the effect of the current banking situation on trading and business operations to be ‘serious’ with 29% of respondents feeling that their businesses were at risk of closure.  The situation is more serious for smaller or micro businesses that have less than 3 employees as 58% of them said they were more at risk of losing employment over the coming 6 months.  Almost half of respondents indicated that the situation is serious (34%) or very serious (15%) and over half of respondents said they needed a minimum of €15,000 in working capital requirements.

Half of the respondents said that their businesses were curtailed by banking restrictions. The most common means of curtailment was by bank overdraft/bank loan restrictions, also additional charges, no processing of loans and higher levels of security demanded. Other sources of credit were predominantly Credit Unions, CEB and private investors.

Commenting on the survey the Chairman of the CEB Network, Michael Tunney, said, “We asked the respondents what, if any, were the other credit issues that you have experienced?” I think a sample of the answers tell their own story. They include;

“My bank simply does not care or understand. I have a small Business for 10 years, with a steady sales sheet that has huge room for growth. I recently moved premises and bought all my own equipment. I ask for and increase in my overdraft facility, I was refused and also my overdraft taken away. I feel very let down by them as my problem is simply my customers have not paid me on time, but the difference is I know my customers, I know I will get my money, it may be late but it will come. My bank should realise from past transactions when the bulk of my lodgements are made and the overdraft facility is vital for my business , but, No ,it's better for them to charge me a an unpaid transaction fee . My business needs an overdraft facility or Business Loan of 1000 Euro for approximately 3 yrs, until I have my Equipment loans paid off.”

“I am unhappy that at all times in the past forty years I have run a profitable and cash-generating business. When looking to loan money, over the past ten years the banks paid more attention to the "security" given by title deeds to property etc., rather than the security of dealing with known good and honourable business people; the type of people who would never take a foreign holiday or eat in a restaurant again if faced with being unable to pay their debts.”

“My bank is unwilling to restructure current debt or provide any additional working capital even though the level of security currently held by the bank far exceeds the amount of monies borrowed. In an effort to try and secure the restructuring and additional funding necessary to drive growth the MD was willing to release equity from his private residence and invest this in the form of a directors loan back into the company, this was also dismissed out of hand with the comment "that no matter how much was being put in that the Bank were not going to provide matching or any multiple of funds" to the business. Despite a major improvement in our current trading position and having reduced overheads my bank still refuses to restructure or provide additional borrowings and no other lenders are willing to look at the proposal as they say," We are looking after our own".

For further information please contact Michael Tunney, Chairman CEB Network, 087

*Credit Crunch Survey

Conducted by the County & City Enterprise Boards
January 2010
An online survey was circulated to County and City Enterprise Board (CEB) contacts/clients during January 2010.  The main objective of this survey was to ascertain whether CEB contacts/clients were experiencing difficulties accessing credit as a consequence of the global credit crunch.  It was also of interest whether there had been any significant changes on accessing credit since the previous study was conducted during June 2009.

This survey was originally designed and developed by Dun Laoghaire Rathdown CEB. It was distributed by the CEB Central Coordination Unit (CCU), Enterprise Ireland who distributed the survey hyperlink to all CEBs.  Each CEB was responsible for distribution of this survey hyperlink to their email contacts and clients.  Through facilitation of this survey distribution a high number of responses were obtained across the CEB network thereby increasing the reliability and validity of these survey findings.  The questionnaire used in this survey is in Appendix One. A total of 687 responses were received.  Responses were analysed by the CEB Central Coordination Unit (CCU), Enterprise Ireland.  Relevant findings are outlined in the following sections.  Responses were received from the vast majority of CEBs with the highest level of respondents from Donegal, Kerry and Fingal CEB clients.

Main Findings:
1. BANKING RESTRICTIONS

Respondents were asked whether the credit availability situation was the same as the previous survey six months previous.

When this survey was completed in June 2009, 49% of respondents felt that credit availability was worse with 47% of respondents feeling as it was the same as six months previous to that survey. 4% of respondents felt at that time that conditions had improved.

Respondents were evenly distributed between those who felt their business was being curtailed by banking restrictions and those who didn’t. This was an improvement on the situation six months ago when over half of respondents expressed the view that their business was curtailed by banking restrictions, at 56%. It may also indicate that respondents to the previous survey have ceased trading.

This latest survey indicates a slight improvement regarding the impact of business restrictions compared to restrictions on the business compared to the previous two surveys. (see Fig 3 above). It may also indicate that respondents to the previous survey have ceased trading.

Table 1: How Business is being Curtailed

In the case of those whose business are being curtailed by far the most common reason is bank overdraft/bank loan restrictions which amount to 63%.

2. OTHER CREDIT SOURCES

Table 2: Secured Credit from Other Sources

As can be seen in Table 2 Credit Union, County/City Enterprise Board and Private Investors were identified most frequently as other sources that respondents secured credit from.

In addition a wide range of other sources were also identified, primarily having personal loans/savings or director loans or family sources.

3. TRADING & BUSINESS OPERATION

Many respondents considered the effect of the current Banking situation on trading and business operation to be serious.

Clearly the current banking situation is having a serious effect on CEB contacts/clients’ trading and business operations with just under half of respondents indicating that it was either serious or very serious (49% combined). Just 14% of respondents said that this does not have an effect with a further 37% considering it to impact slightly on the business. 

The situation at the time of this survey has slightly improved however on the situation at the time of the previous two surveys as can be seen from figure 5 above. However this may be down to the more vulnerable businesses having already ceased trading.

29% of respondents to this survey indicated that their business was at risk of closure. 
This is a smaller proportion than those who said their business was at risk of closure in the survey conducted six months previously (which found 34% of businesses at risk of closure). This may indicate a resilience of CEB client businesses or the more likely scenario that a number of businesses have ceased trading.

Almost three fifths of respondents to the question about whether employment is at risk in their enterprise indicated that employment was at risk (57%).

Table 3: No. of People Employed cross tabulated against at risk of losing employment

Further analysis of this question indicates that businesses with less than 3 employees were more at risk of losing employment over the coming 6 months.

4. FINANCING REQUIREMENTS

Respondents were asked would a small loan scheme operated by the CEBs up to 20K to support viable business and its working capital needs be helpful and desirable?

Table 4: Level of Working Capital Finance Required

The majority of respondents (51%) to this question had a working capital requirement for a minimum of €15,000 (Table 4).

Table 5: Level of Working Capital Finance Required January 2009 Vs June 2009 Vs January 2010

It should be noted however that when compared with the responses from the survey conducted a year ago there is now a greater requirement amongst respondents for relatively lower levels of working capital finance – demand for €1-15K at 49% compared to 40% a year ago.

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 8 highlights the findings.

The vast majority of respondents indicated that this proposed scheme would be of interest, at 73%.  This was an even lower percentage than those in the previous survey when 84% indicated an interest six months ago (see Fig 9).This would indicate a lower level of demand for a CEB loan scheme than previous surveys which may be due to a number of businesses ceasing trading or the availability of funds from other sources such as credit unions.

67% of respondents said they had experienced increased levels of debtor days. This percentage has decreased from 76% in the survey conducted six months previously.
This may demonstrate tighter cash flow management and consolidation of the financial position in the business.

5. FINANCIAL INSTITUTIONS

Table 6: Banking Institution Used (n=1086)

The largest banking institution market share amongst respondents to this survey was Bank of Ireland and AIB at 42.4% and 32.9% respectively. 

Table 7: Banking Institution Used, January 2009 Vs June 2009 Vs January 2010

It is interesting to note that Bank of Ireland, NIB and PTSB increased their share of the market. Whilst AIB has dropped market share slightly(from 37.2% to 35.6%).