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SME Credit Conditions in the Pandemic Recovery

Author

Listed:
  • Durante, Elena

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)

Abstract

We analyse the credit conditions facing Irish SMEs in the context of the pandemic recovery. SME trading performance has continued to improve, with turnover and profitability indicators rebounding significantly from pandemic lows. Government policy supports have been large and composed mainly of grants. These supports have provided extensive liquidity support to firms and mitigated debt overhang risks, while also likely weighing on demand in the formal credit market. New bank lending to SMEs has fallen moderately and this has been mainly driven by declines in lending to pandemic-affected sectors. SME demand for credit remains low. Credit supply indicators show little sign of stress, with loan application rejection rates remaining steady. The tapering of government supports to businesses may result in a rise in credit demand over the coming months.

Suggested Citation

  • Durante, Elena & McGeever, Niall, 2022. "SME Credit Conditions in the Pandemic Recovery," Financial Stability Notes 2/FS/22, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:2/fs/22
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no.2-sme-credit-conditions.pdf?sfvrsn=1cc2901d_16
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    References listed on IDEAS

    as
    1. Duignan, David & McGeever, Niall, 2020. "Which firms took COVID-19 payment breaks?," Financial Stability Notes 6/FS/20, Central Bank of Ireland.
    2. Conefrey, Thomas & Hickey, Rónán & McInerney, Niall, 2021. "COVID-19 and the Public Finances in Ireland," Economic Letters 3/EL/21, Central Bank of Ireland.
    3. McCann, Fergal & McGeever, Niall & Yao, Fang, 2021. "SME viability in the COVID-19 recovery," Research Technical Papers 9/RT/21, Central Bank of Ireland.
    4. Gaffney, Edward & Greaney, Darren, 2020. "COVID-19 payment breaks on residential mortgages," Financial Stability Notes 5/FS/20, Central Bank of Ireland.
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    7. Ferrando, Annalisa & Mulier, Klaas, 2022. "The real effects of credit constraints: Evidence from discouraged borrowers," Journal of Corporate Finance, Elsevier, vol. 73(C).
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    9. Kelly, Jane & McElligott, Rory & Parle, Conor & Sherman, Martina, 2021. "Credit Conditions for Irish Households and SMEs," Economic Letters 5/EL/21, Central Bank of Ireland.
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    Cited by:

    1. Lambert, Derek & McGeever, Niall & O'Brien, Eoghan, 2022. "Wage subsidy utilisation by Irish companies," Financial Stability Notes 8/FS/22, Central Bank of Ireland.
    2. McCann, Fergal & McGeever, Niall, 2022. "Enterprise policy issues for distressed businesses following the unwinding of pandemic supports," Financial Stability Notes 9/FS/22, Central Bank of Ireland.
    3. McCann, Fergal & McGeever, Niall & Peia, Oana, 2023. "Do non-bank lenders mitigate credit supply shocks? Evidence from a major bank exit," Research Technical Papers 9/RT/23, Central Bank of Ireland.

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