AIB announce €500m boost for small businesses

AIB YESTERDAY said it would make €500 million available to small and medium-sized enterprises (SMEs) from next Tuesday, June 1st, for additional working capital and restructuring facilities.

The move is part of its commitment to the Government to provide an additional €3 billion in funding to SMEs in both 2010 and 2011 under the terms of the recapitalisation of the banks by the state.

Speaking to the The Irish Timesyesterday, Denis Cunningham, AIB's general manager of retail and SME business, said 87 per cent of the bank's SME clients would be "captured within the threshold" announced yesterday.

Small business customers with existing branch-based current and loan commitments can restructure these into a single “recovery loan” up to a maximum of €250,000. The restructured debt will be offered over an agreed term with an interest-only option for up to two years. This is aimed at easing the burden on small businesses during the recession.

Additional working capital will also be available for SMEs, subject to a maximum 50 per cent of total existing qualifying branch facilities or €50,000, whichever is the lower figure.

Mr Cunningham encouraged SMEs to make an application to restructure their facilities.

“What we’re now saying is that SMEs that have been viable in the past are now caught where they are experiencing difficulties getting paid. But they can demonstrate viability and we are prepared to take a longer term view on them.”

Mr Cunningham said an SME with a €100,000 loan, would release €1,000 a month back into their businesses by moving to interest-only payments.

Minister for Enterprise, Trade and Innovation Batt O’Keeffe welcomed AIB’s announcement but said it must be “backed up by actual lending on the ground”.

“The Government will be closely scrutinising the proposals submitted by the two main banks to the Department of Finance last week to ensure that they are appropriately geared towards providing a credit supply to small businesses,” he said.

Mr Cunningham said AIB has about 250,000 SME customers in Ireland. With the bank set to offload its overseas assets to meet new capital regulatory requirements, he said AIB was committed to supporting SMEs in the domestic economy.

“That is the future [for AIB]. We are a bank that is systemically important here and if we’re not supporting SMEs then we’re not working in our own best interest or the best interest of the economy. This is a common cause about supporting SMEs.”