Newly published research from Trinity College Dublin shows that Irish-based SMEs are least likely to apply for bank loans because of fear of rejection.
Of the 6,287 SMEs interviewed across nine Euro zone countries for the study, 44% of Irish firms said they would not apply for credit due to rejection fears, with Germany next (24%), followed by Greece (19%), and Belgium (18%).
The ‘Discouraged Borrowers: Evidence from Eurozone SMEs’ study also suggests that younger, smaller firms are the most likely to be discouraged.
One of the report’s lead authors, Professor in Finance Brian Lucey from Trinity’s Business School, said “discouraged borrowers, firms that would have good prospects but who are not borrowing for a fear of rejection, represent a not insignificant problem in the EU.
“Banks and governments need to do more to educate firms as to the credit available and to persuade banks to look at firms on their books which have not followed their peers in borrowing.
“This is not to advocate pushing credit on unwilling customers - it is to suggest that we should focus more on those who could borrow for good projects but who do not,” he concluded.
