SCBI loan rates are 1.5% cheaper than market

State-backed agency hopes to further support Irish businesses in 2016 with an active pipeline of new lenders and funders

The state-backed Strategic Banking Corporation of Ireland (SBCI) delivered loan rates which were 1.5 per cent lower than market rates since its creation in 2015 as it supported some 17,000 SME jobs, a new economic analysis of its impact reveals.

SBCI chief executive Nick Ashmore said: "These initial figures show that the more choice and competition generated in the SME lending sector, the more we can help our indigenous businesses grow and support jobs and so we hope to build on this initial impact and further support Irish economic activity with an active pipeline of new lenders and funders in 2016."

The SBCI, which was set up by Government in March 2015 to deliver lower cost funding to Irish small and medium sized businesses (SMEs), gets special low-cost funding from three major lending partners, including Ireland Strategic Investment Fund. It says it expects to partner with more funding institutions in 2016 “to address growing demand for its loans”.

Interest rates for SMEs started to trend downwards in 2016, albeit slowly, the SBCI said, while SBCI’s loan rates were, on average, 1.5 per cent lower than market rates. Across the SBCI’s top five sectors, interest rates were lower across the board, ranging from 0.09 per cent cheaper among hotels, to 1.17 per cent in health. The average loan size was €37,000 and some 4,619 SMEs have drawn down loan SBCI loans so far.

SBCI lending supported 17,000 jobs in Irish SMEs, as SME employment increased in 2015 for the first time since the crisis. The top five sectors in which lending occurred were: hotels & restaurants, agriculture, health, retail and other business services, the SBCI said, adding that some 92 per cent of SBCI loans are being used for growth and investment versus 53 per cent of current SME lending market loans. SBCI accounted for 9 per cent of new lending in these sectors from March to December 2015.

The survey shows that rejection rates of bank loan applications of Irish SMEs are second highest across the EU at 17 per cent, behind the Netherlands (25%), but far ahead of the UK (4%). However, rejection rates are falling in 2016, the SBCI said.

While SMEs, like other parts of the economy, continue to deleverage, by about €20 billion since 2010, the study shows that lending flows have improved, with some € 3.4 billion of new SME lending approved in 2015, up by 24 per cent on 2014.