SME default rates declining - SME Market Report

• New lending to SMEs shows positive growth since the start of 2014
• Improvement in trading performance since 2013
• Rejection rates declining, but are currently above euro area averages
• Interest rates on SME loans remain high relative to the euro area

SME Market Report (PDF 4.66MB)

Today the Central Bank publishes the SME Market Report for the second half of 2015.
The Report shows that new lending to non-financial, non-real-estate SMEs has grown strongly since the start of 2014. Despite this growth, the overall stock of SME loans continues to decline, implying that the volume of repayments is outstripping new lending in each quarter. Since the last Report, the stock of SME loans has declined a further 8%. In addition, the share of SMEs with no outstanding debt is increasing.

The Report also shows consistent declines in SME default rates. 19% of loans and 31% of total outstanding balances are currently in default. Default rates are highest in the Construction and Hotel/Restaurant sectors.

Interest rates on Irish SME loans are high relative to other euro area countries, and rates did not decline in line with the euro area from 2014. The interest rate differential between small and large loans is also high in Ireland. However, the latest data show signs of a slight reduction.

Bank finance application rates have declined since 2012, driven by reduced applications for renewed/restructured products. Loan application rates have been steady, but are low by international levels. The majority of finance applications are for working capital purposes. Rejection rates, which have declined since 2013, are above euro area averages.