Higher borrowing costs faced by Irish businesses compared to their European peers are continuing to dampen demand for credit across SMEs almost two decades after the financial crisis, according to research from the Economic & Social Research Institute (ESRI). The research paper also said that lower levels of competition in the Republic is also likely suppressing demand. The weighted average interest rate on new loans to non-financial companies was 4.96 per cent in April, compared to the euro area average of 3.54 per cent, according to the latest figures from the Central Bank. While new SME lending in the Republic rebounded from an average of €680 million per quarter between 2010 and 2015 to €1.2 billion per quarter for the subsequent five years, it has since dipped to €1 billion per quarter, according to the ESRI paper, written by a group of economists and researchers led by Dermot Coates.Credit demand by SMEs also peaked across the wider euro area following the financial crisis and has been declining ever since, it said. It added that that this is “potentially a worrying sign” when viewed against an ongoing gap between the level of investment needed in Europe to boost productivity and economic output – and what is actually taking place. “There are two clear differences between Ireland and other countries. Irish firms have a higher demand for trade credit and a lower demand for bank loans than that found in other countries. Bank loan demand has not risen substantially, even with very strong recent economic growth domestically,” according to the paper. Trade finance facilities – from invoice financing to export and import loans – are used to bridge the gap between goods or services being sold and the receipt of payment. The over and above use of trade credit in the Republic may also reflect how non-bank financing in Ireland “has increased notably in recent years and now accounts for half of the volume of new credit”, the report added.