Lending to viable firms a priority

SMALL BUSINESS:THE DEPARTMENT of Finance will "flesh out" the lending targets of the two "pillar" banks and develop initiatives to ensure new lending to viable businesses, Minister for Finance Michael Noonan said.

He said the department would work on “targeted initiatives” designed to address “specific market failures” to help new and expanding companies developing new products to secure finance.

Department officials will examine the role of the Credit Review Office and the loan assessment procedures and skills at the two “pillar” banks, Bank of Ireland and a combined AIB-EBS.

The Government will also examine how the banks report new loans and what can be done to support the continued operation in Ireland of foreign-owned banks.

In an effort to support the beleaguered small and medium-sized enterprise (SME) sector, the Government announced that a temporary, partial credit guarantee scheme would be set up to improve access to credit for SMEs.

The scheme will complement rather than be a substitute for existing lending by the banks, said the Minister. The Government will initially commit to guarantee loans for one year before rolling over loans over subsequent years.

“There will be a modest and known level of exposure to the taxpayer when the scheme is launched,” said Mr Noonan.

He expects to see a significant knock-on benefit to the economy in terms of job creation, welfare savings and returns to the exchequer through higher taxes.

Details of the scheme will be announced in June. The scheme will be in place by the autumn.

Mr Noonan said a microfinance start-up fund to provide loans to small business was being developed and would be ready for the budget in December.

The Government said it would also promote greater access to procurement opportunities in the public sector. This should make it easier for SMEs to bid for Government or public sector contracts, and will involve identifying and overcoming barriers to the participation of SMEs in the procurement process. In addition, the Government will look to foster greater SME engagement in developing innovative products and services to meet the needs of public bodies.

Among the other initiatives announced are the internship and training programmes, which should help companies to take on extra staff.

The Minister said that up to €20 billion of more than €30 billion in new lending agreed by the two pillar banks would go to SMEs over the next three years.

“The authorities will be rigorously monitoring the banks’ activities to ensure that credit is available for borrowers meeting reasonable credit standard requirements,” said Mr Noonan.

The plans to restructure and recapitalise the banks were aimed at ensuring the availability of credit to viable businesses, he said.

The Irish Small and Medium Enterprises Association (Isme) welcomed the announcement, but said that credit-starved SME employers would only be in a position to increase employment when their cost base has reduced and banks begin to lend normally.