Schemes to help firms access loans due to start

TWO LONG-awaited Government-backed loan schemes designed to help small- and medium-sized businesses gain access to credit are to be introduced next month.

The Credit Guarantee Scheme and Micro-enterprise Loan Fund will offer more than €500 million to eligible companies over their duration, the Department of Jobs and Enterprise has said.

The introduction of the schemes, which were first announced more than a year ago, could provide a boost to businesses struggling to access funding from the banks.

A report by two Central Bank economists this week found Ireland had the second-highest rate in the euro zone for borrowers who needed loans but were discouraged from applying in the belief they would be rejected.

The head of the Credit Review Office, John Trethowan, said this week Bank of Ireland and Allied Irish Banks would struggle to reach targets set in their recapitalisation agreements with the Government to lend €3.5 billion each to small businesses this year.

The Credit Guarantee Scheme will be open to companies employing fewer than 250 staff and with an annual turnover of less than €50 million. It will offer loans of up to €1 million.

Under the scheme, a 75 per cent State guarantee is to be provided to banks against losses on qualifying loans to firms with growth and job creation potential who currently have difficulty getting finance from the banks.

Initially the scheme will facilitate up to €150 million of additional lending per annum to SMEs for three years. The scheme will be demand-led, and take-up and performance will be closely monitored, the department said.

The Credit Guarantee Bill, which underpins the scheme, passed through all stages in the Oireachtas before the summer recess. The scheme will be operated by Capita Services.

The micro-enterprise loan fund will provide loans of up to €25,000 to commercially viable enterprises that do not meet conventional risk applied by banks.

The companies must employ fewer than 10 people and have an annual turnover of under €2 million. The scheme is to be administered by Microfinance Ireland.

The scheme will provide €40 million to eligible companies over the next five years and there is a provision to extend it for five more years, during which a further €50 million would be available.

Chambers Ireland deputy chief executive Seán Murphy said the organisation had been calling for similar schemes for three years and that he hoped the period between the introduction of the scheme and the first loans being issued would be brief. “It should hopefully benefit marginal companies who are on the fringes of getting loans through the formal processes,” he said.

Separately, the Central Bank report on lending to SMEs is to be debated by the Oireachtas Joint Committee on Finance, Public Expenditure and Reform when it meets in September.

Committee chairman Alex White TD said it was striking that the report had been “so flatly rejected” by the banking industry.

He said he hoped the committee would be able to hear from the Central Bank, representatives of the banks and the SME sector.