Central Bank of Ireland Conference: The Irish SME lending market: Descriptions, Analysis and Prescriptions.

It would make the day more interesting if tickets could only be made available via a loan from one of the pillar banks.

@Jesper

After 2 years of credit drought then it might be possible to assume that the remaining SMEs are used to and can survive the current conditions. The ones that couldn’t are probably all gone already

You jest, surely.

IMHO the extent of insolvency, though not declared, in the SME is staggering. In many cases banks are being paid back by the expediency of not paying other creditors, including preferential ones like the revenue. A six months payment period is not longer unusual.
As there are usually no net assets left in these situations, using legal means to recover debts is worse ta useless. This is because the trade creditor must pay the liquidator if there are no assets in the insolvent company.
In typical Irish company law fashion, many companies have ‘ceased trading’ but have no legal obligation to liquidate the company despite owing millions. Many continue to trade in essentially the same business, using sister companies or parent companies within the same group, committing no offence it would appear.

In fact many individual do not want to be paid in cheques or direct to bank. The reason is that the banks use the money to reduce the loans outstanding, with other creditors including on occasion staff going unpaid.

In summary I would say we are nowhere close to the end of company and business failures. Reading Galbraith’s ‘The Great Crash’, the US experience was that there were large numbers of failures even as the economy started to emerge from recession.

You can’t even lead that horse to water (SME’s borrowing from the banks).

I regularly network with other small business owners. I have seen plenty of evidence with my own eyes that a lot of them out there have effectively ‘shrink wrapped’ themselves and may still appear to be open but are just idling over while their owner is doing anything he/she can to make some money to pay the bills (e.g. bar work, van deliveries, gone off to the UK to make some dosh for a couple of months, etc.). People are just living on hope that something will improve soon but as we all know, hope is not a strategy.

There is little appetite out there for any further borrowing in this sector and you can make all the targets you like for bank lending to SME’s but if they want to avoid the banks, they will… and they do. It’s come to something when people would rather gargle battery acid than talk to their bank.

I personally know of two small businesses (two man companies) that have effectively ‘relocated’ to the UK because a) they only see ‘ten years of austerity in Ireland’ ahead of them and b) if it should still go under, at least they will be subject to UK bankruptcy laws, not Irish ones.

I’ve also been talking to a number of providers of instant/serviced offices lately and their clients have been leaving in droves (you can pick up a very cheap serviced 1-5 person office these days and they will haggle too).

In addition to this, larger companies are putting the most amazing squeeze on smaller companies who are suppliers. Often asking for prices to be halved (that is not an exaggeration – been on the end of that one myself). This is more to do with being opportunistic than the survival of the larger company.

One assumes that the tax take from the smaller company/self employed is going to drop off a cliff this year? I’m not sure what percentage of the overall tax take that accounts for and whether it would cause a significant impact on the overall deficit situation. Maybe the gov knows that and it’s why they’ve been chasing the pensioners!! Got to make that shortfall up somewhere or heaven forbid, that Citibank economist might be right and we are going to need another bailout.

I worked in Credit Risk in Ireland when the times were good in Ireland. Even in those times I believed that the commercial realities regarding credit were bad.

I believe that what Joseph Ryan and PR Guy are saying to be true about how it works in the bad times.

I might add that I believe the laws are too debtor friendly until you get to the personal bankruptcy and then the laws are too draconian. If it would be cheaper to use the courts to recover small debts then the small problem of a small debt can quickly be resolved instead of as is now: Small debts accumulate, small debts grow and after some time trade creditors, employees and banks are facing large problems with large losses.

Increased probability of recovering money makes it easier to justify giving credit, the debtor friendly legislation creates the opposite situation.

Plenty of experts on this conference, how many of them have practical experience?

The Amazing part of the Conference is that 4 of the Speakers are from outside the country and the remainder are Public Servants. Is it any wonder the Central Bank made such a “cock up ” of Bank Regulation. It might help if they included representatives of the SMEs.

Despite what Joseph Ryan and PR Guy state there are lots of SMEs who have not got their head in the sand and their businesses need credit as do their customers. There is only one Bank open for business in Ireland at present and the Central Bank shut down the Credit Unions from lending with their restrictions which has made matters worse. There are few Public Servants or Academics who understand business so I would not waste time with this unless you happen to be a banker or clueless journalist grovelling to spread bad news.

I note that one of the topics is “The importance of SMEs in Irish economic activity”. There is not a Politician or CS/PS in this country that gives a tuppeny damn about SMEs and the Self Employed. Most people in this sector long ago decided that the only way forward is to paddle your own canoe.

@TRP

“Despite what Joseph Ryan and PR Guy state there are lots of SMEs who have not got their head in the sand and their businesses need credit as do their customers. ”

I’m not trying to imply that all SME’s are in trouble or are avoiding the search for credit …. but I bet my ‘lots’ are starting to outnumber your ‘lots’. I run one and I associate with lots of people who run one and it is bloody dire out there. Thankfully, my business doesn’t owe any banks any money and I don’t need overdraft facilities but I’m rare.