herald

Tuesday 24 April 2018

Can I stop my bank cutting overdraft for my small business?

With the banks shrinking their loan books as fast as they can, small businesses are being squeezed hard. Edward's business is not alone in having its overdraft cut and a loan application rejected.

A recent survey conducted by small business representative group ISME found that almost half of the companies who had applied to their banks for funding in the previous three months had had their applications rejected.

Even among the companies whose applications were successful, over half of them were forced to pay higher interest rates or provide their bank with increased security.

Even more disturbing was the fact that almost a quarter of the "successful" companies, ie. those whose loan applications were accepted by their banks, had their overdrafts reduced.

In other words, many apparently successful loan applications are in reality no more than pre-existing overdrafts being converted into other forms of lending.

The previous government's response to the credit crisis facing small businesses was to set up the Credit Review Office (CRO). It is supposed to adjudicate in cases where small businesses and farmers have had credit applications of up to €250,000 rejected by their banks. All of the banks participating in NAMA belong to the CRO mechanism.

The CRO published its latest quarterly report last month. This revealed that it had received 76 applications from companies who had been refused credit by their banks during the first three months of 2011. According to the CRO, its decisions resulted in companies who had originally been refused credit by their banks, getting a total of €1.77m in loans, and that this protected 223 jobs.

To which one is tempted to respond, so what? ISME, not surprisingly, was scathing in its description of the CRO, claiming that usage of the facility was "negligible" and that "as an appeals mechanism, it is not working".

For what it is worth, if Edward's bank is one of the NAMA banks he can appeal its decision to the CRO. It can be contacted at Credit Review Office, The Plaza, Eastpoint Business Park, Dublin 3, while its website is creditreview.ie.

While the public sector pension levy applies to all public sector workers, even those who don't qualify for a pension, deducting additional pension contributions from someone who doesn't qualify for a pension is an entirely different matter. Kevin should contact his employer about this matter immediately and if that doesn't produce a satisfactory response he should then contact the Department of Education.

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