Credit crunch continues to worsen

The County and City Enterprise Boards' second half yearly survey of small businesses shows that almost half of all respondents felt that credit availability was worse than six months ago. The survey reveals that 47% of respondents said they had been refused additional credit, compared to 40% six months ago. Those who said they had succeeded in getting more credit also fell from 29% to 27%. The County and City Enterprise Boards represent the 35 bodies across the country who provide support for small businesses with ten employees or fewer. The CEB survey says the current banking situation is having a serious effect on its clients' trading and business operations with half of respondents saying that it is either serious or very serious. Over half of respondents say their business was curtailed by banking restrictions, including bank overdraft or bank loan restrictions, additional charges, no processing of loans and higher levels of security demanded. The CEB noted that businesses are turning to other sources of credit, including credit unions, CEBs and private investors. The survey also points to a reduced number of businesses using AIB and an increase in the number using Permanent TSB. The survey also reveals that 34% of companies who took part said that their business was at risk of closure - a higher figure than the last survey (31%). Asked 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. Another 39% said that jobs were not at risk. Michael Tunney, Chairman of the CEB Network commented: “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.” He warns that if the situation continues, many good businesses will be forced to close as a result. Mr Tunney said that the boards have been working on a proposal based on the successful schemes working in the Border counties for the last 20 years through the County Enterprise Funds. He said that if a source of external money could be identified, a pilot scheme could be developed before the end of the year.