Fianna Fáil Spokesperson on Jobs, Enterprise and Innovation Dara Calleary has described the figures published today by the Central Bank in relation to SME debt as shocking and an indictment of Government policy.
Deputy Calleary said: “A lot of attention is correctly given to residential mortgages in arrears due to the highly sensitive nature of the prospect of a family losing their home. However in terms of delivering economic recovery it is vital that the debt being carried by small businesses is also robustly tackled. 26% of SME loans are now in arrears. This represents the single biggest threat to the economy at the moment.
“While my party has been critical of the Mortgage Arrears Resolution Targets process it does have the benefit of providing a benchmark by which the banks can be judged. We need similar published targets in relation to SME debt. In simple terms the banks need to be held to account publicly in relation to the need to tackle this issue.
“The key issue is to identify what are the sustainable cash flows for a business. Once this is done long-term restructuring options can be considered such as parking some of the debt at zero interest similar to a split mortgage, a permanent interest rate reduction, a debt write down or debt for equity swap.”
“I am also of the view that the State must play a role in ensuring that SMEs can access affordable advice when looking to restructure their debts. We have no more time to lose on this issue,” noted Deputy Calleary.
“On the other side of the equation there is an ongoing need to improve the flow of credit to businesses. We have seen umpteen high profile announcements from Minister Bruton including the Credit Guarantee Scheme, the SME Turnaround Fund, the SME Equity Fund and the SME Corporate Fund. But on every occasion these have come up short.
“Lending to well-run SMEs with good business prospects should be the bread and butter activity of our banks. Failure to deal with legacy debt issues means the banks are missing out on opportunities that would secure their profitability in to the future. Inaction in relation to arrears and the lack of new lending are intrinsically linked. Until the banks are forced to get to grips with arrears new lending activity is likely to continue to be anaemic,” added Deputy Calleary.