By most metrics, the shadow of the financial crisis years has long lifted from the Irish economy. For many Irish small and medium-sized businesses (SMEs), however, the credit crunch remains an ongoing concern. Research by the Economic and Social Research Institute (ESRI) published in June finds SMEs ‘continue to face significant challenges in accessing finance, with high borrowing costs and limited banking competition suppressing demand for credit’.
Against this background, SMEs are looking for advice from finance professionals about the options available to them in an increasingly complex lending market where traditional sources of finance are being supplemented by a range of alternatives.
‘Cost – not just availability – remains a key barrier to SME finance’
The study identified a ‘triple pattern’ in the SME credit market: low demand for bank finance, high use of trade credit and relatively low rejection rates. ‘This combination suggests that cost – not just availability – remains a key barrier to finance,’ the ESRI says. Tara McIndoe-Calder, co-author of the report, calls for ‘continued policy innovation … to foster a more competitive credit market’ and argues that ‘improving SME access to affordable finance will be critical to sustaining Ireland’s long-term economic growth and competitiveness’.
Growing use of alternatives
The Celtic Tiger years have left their mark on the country’s high street banks. They are now more risk-adverse and subject to a new regime in terms of capital requirements and documentation, especially for SMEs at the early stages. Jon Ihle of The Sunday Times reports funding for SMEs by the pillar banks fell in 2025, with Bank of Ireland’s SME lending down year on year by €104m to €7.1bn and AIB’s dropping €200m to €6.8bn. ‘This is not a one-off aberration. It is a trend stretching back years,’ he says.
A fall-off in bank lending is not necessarily a problem if there are real alternatives. The government has played a lead role in driving credit diversity for SMEs through entities such as the Strategic Banking Corporation of Ireland (SBCI) and Microfinance Ireland.
Rory Finegan of Beyond Accounting says: ‘SBCI has created real competition for the pillar banks and made it cheaper to borrow.’ Meanwhile Microfinance Ireland has been described by government sources as ‘an unqualified success since it was first established’.
‘Non-bank lenders are playing a vital role in the economy’
Bibby Financial Services highlights the growth of invoice finance, where credit is linked to the value of unpaid invoices, in recent years and says €1.2bn was advanced to businesses through the mechanism in 2025. And a PwC analysis of lending opportunities for SMEs highlights the role of private equity, arguing that ‘despite global volatility, Ireland’s mid-market remains attractive, with private equity involved in roughly one in four deals in 2025’.
The Banking & Payments Federation Ireland agrees that ‘non-bank lenders are playing a vital role in the economy’ and says the foundations of this new opportunity are structurally secure. Its CEO Brian Hayes points out that many lenders ‘are regulated by the CBI as retail credit firms. From a regulatory perspective, they are subject to the same conduct of business rules … as banks’.
Missed opportunities
Despite these new solutions, access to credit remains an issue. ISME, the representative body for Irish SMEs, says the decline in SME credit across the economy over the past four years has happened as gross national income has grown by 43%. ‘This mismatch between available capital and SME investment is one of the most significant missed opportunities in the Irish economy,’ it says.
Uncertainty is a major barrier to future investment
More information
Read the AB article ‘From accountant to adviser’ on supporting SMEs, and take a look at ACCA’s SME support toolkit
ISME’s concern isn’t so much that SMEs are under threat because they cannot borrow large sums – it accepts that ‘many firms are satisfied with their current size and investment rates’. Rather, it argues that, for those that do want to grow, ‘external finance constraints are a barrier to investment… Scale without capital is not impossible to achieve, but it is difficult.’
ISME also sees the potential to address this in proposals for an Irish savings and investment account (see AB article ‘Time for savers to become investors’), expected to be announced in Budget 2027, welcoming ‘a system that allows citizens to invest some capital in riskier non-listed businesses’.
A blended approach
Government data from 2025 shows 56% of SMEs identify ‘uncertainty’ as a major barrier to future investment. It is an outlook where derisking and increased pragmatism are set to prevail. Laura Gilbride, deals partner with PwC Ireland, says a blended approach to funding is now mainstream among SME clients. ‘Our clients are combining bank term loans with specialist non-bank options ranging from working capital solutions to unitranche and cashflow facilities,’ she says.
‘Credit unions are stepping into a much bigger role’
She identifies a surprising new addition to alternative lenders over the past year. ‘Credit unions are also stepping into a much bigger role,’ she says. ‘From September 2025, their business lending capacity has jumped to 15% of assets, which is dramatically expanding potential SME funding.’
Amid change, the role for financial advisers remains clear. Paddy Gahan of Gahan Accountants says: ‘Businesses most likely to secure funding usually have strong financial visibility, organised records and a clear understanding of how the money will actually be used.’
An international report from ACCA backs up this view, pointing to ‘the pivotal role of accountants in supporting SMEs’ resilience and growth’. The days when a life-changing loan necessitated a trip to the bank may be over, but a strong partnership with finance professionals remains central to securing the future of SMEs.
Irish SME financing
Irish SMEs are:
- significantly less likely to seek bank loans than their European counterparts
- more dependent on trade credit than elsewhere in the euro area, which may limit investment in long-term growth
- subject to interest rates above the euro area average
- being discouraged from applying for credit by high costs
Source: ESRI
