INSIDE THE WORLD OF BUSINESS
Credit where credit is due as small firms look for lifeline
THE ROASTING the Central Bank’s regulator, Fiona Muldoon, gave the banks over their slow response to the mortgage crisis at the Irish Banking Federation overshadowed other interesting points about the other crisis in banking – the availability of credit to small- and medium-sized enterprises.
IBF president John Reynolds, chief executive of KBC Bank Ireland, noted that many owners of solid SMEs dabbled in speculative property investment during the boom and that this was now affecting their creditworthiness.
The overhang of this debt “must be factored in by banks when making credit decisions”, he said, adding that in no case should the extension of credit be seen as “a panacea” to fundamental and underlying problems in a business.
Where Reynolds noted a big problem here, another speaker, John Moran, secretary general of the Department of Finance, pointed to one possible solution.
He raised a point around an important difference that is sometimes lost in the debate about the availability of credit to businesses – what many companies need is not more debt but fresh investment.
Additional equity and working capital in the restructuring of businesses could release viable SMEs from non-viable property plays, Moran told the conference, and that new sources of equity or mezzanine financing must be found.
He said the department was working to find ways to use the National Pension Reserve Fund to create new funding sources, citing the joint venture with Silicon Valley Bank as an example.
Disentangling the heavy drag of property debt from individuals and viable businesses is the single biggest challenge facing banks and borrower alike. In a country where €3 out of every €5 borrowed during the boom years was on property, be it land, offices or homes, this will take a long time.
No wonder Reynolds said that the results of the banks working with customers in difficulty was “frustratingly slow”.
Corporate responsibility is no fad
YESTERDAY, FOUR companies – Veolia Transdev Ireland, EirGrid, Accenture and Pfizer Healthcare – were awarded the Business Working Responsibly Mark, an annual award presented by Business in the Community, an organisation which promotes responsible and sustainable business practices.
The awards were presented at the annual CEO forum at the Guinness Storehouse.
Among the speakers addressing the 150-plus audience was CRH chief executive Myles Lee, who outlined some of the corporate social responsibility (CSR) measures undertaken by the company: everything from sustainable methods of cement production, to a commitment to reducing the high incidence of health and safety issues among contract staff.
Lee was right on the mark as he discussed the issue of sustainable and responsible business practices in a clear and logical way. CRH’s homesy roots are all well and good, but there is also an “increasing focus from the group’s investor base as to how we’re measuring up” in terms of responsible and sustainable work practices.