Independent verification of lending rates across the banking sector is one of 25 recommendations contained in a new report on access to finances for SMEs.
The report, which was published by the Joint Committee on Jobs, Enterprise and Innovation, said independent verification of rates was necessary to address concerns about availability of finance for small and medium sized businesses in Ireland.
The committee said there is an over-reliance on bank loans and overdrafts currently and called for the development of more non-banking sector funding initiatives for firms.
It also said mechanisms to restrict requests for personal guarantees - a particular bugbear for many small firms - should be considered.
Among other recommendations included in the report are a call to make it mandatory for banks to provide written explanations on why applications for credit have been rejected, the introduction of a guaranteed timeframe for dealing with loan applications and greater support for small businesses to improve their financial literacy.
The committee also said credit unions should have a greater role in supporting SMEs and said consideration should be given to lightening the tax burden on interest made on minor investments in crowdfunding.
"The small and medium sized enterprise sectors are integral and important elements of our economy and if we are serious about our indigenous businesses we need to encourage and help create the best environment for them to operate in. The availability of funding and supports are essential for many small businesses to get up and running, flourish, innovate and expand," said committee vice chairman John Lyons.
The committee’s recommendations have been largely welcomed by the business community with the Small Firms Association saying that supply of finance is second only to finding more customers as the most pressing issue facing SMEs.
"It is critical that the practical recommendations contained in this report are accepted and acted upon immediately. They have the potential to make a real difference to improving SME financing," said SFA director Patricia Callan.
Specifically, Ms Callan welcomed the acknowledgement that “a greater diversity of funding such as direct government funding and guarantees, enhanced competition in the business banking market from credit unions and potentially the new Strategic Banking Corporation of Ireland (SBCI), peer-to-peer lending platforms, business angels and venture capital are necessary.”
Separately, Irish peer-to-peer lender Linked Finance’s chief executive Peter O’Mahony described the report as an important step in improving access to lending and the number of channels that SMEs have access to when seeking capital to grow their business.
