AN ANALYSIS OF THE FINANCING REQUIREMENTS OF SMALL AND MEDIUM-SIZED FIRMS IN NORTHERN-IRELAND

This paper investigates the financing relationship between small and m edium sized firms and their loan institutions in Northern Ireland. The study, based on survey data, suggests that firms in Northern Ireland are reasonably satisfied with the financial and support services on of fer from their banks. This is evidenced by the fact that few firms sho p around between banks and also by the fact that 75% of firms viewed t heir bank to be supportive of their business. The analysis also reveal s that the Northern Ireland clearing banks occupy a monopoly position in the supply of loan finance to small and medium sized firms. This mo nopoly position does not, however, result in a positive interest diffe rential at regional level, but rather the analysis indicates that firm s in Northern Ireland are subject to lower costs of debt finance than similar sized firms in Great Britain. Certain problem areas in the fin ancing relationship are also highlighted in the discussion. In particu lar, an examination of the actual mechanics of the loan process indica tes that both the loan period and its collateral make-up are a problem for firms. The loan period tends to be skewed towards the short to me dium term while in over 33% of firms analysed, personal collateral is required as part of the loan guarantee.