SME exporters hit by Brexit could get low-cost loans

If loan scheme is similarly priced to funding for farmers, interest could be about 3%

At present the average cost of SME loans in Ireland is over 6.5%, more than twice the euro zone average

At present the average cost of SME loans in Ireland is over 6.5%, more than twice the euro zone average


Low-cost loans to be made available to SME exporters under a new Government plan could be significantly cheaper than anything currently available on the market.

If the loans are priced at a similar rate to funding available to farmers under a special scheme announced in the last budget, the interest cost could be about 3 per cent. At present the average cost of SME loans in Ireland is over 6.5 per cent, more than twice the euro zone average.

According to Fergal O’Brien, chief economist at Ibec, the cost of credit “is a significant competitiveness challenge for Irish SMEs, and measures to support lower-cost loans would support those firms likely to be most affected by Brexit”.

Minister for Finance Michael Noonan said recently that the Government had applied to the European Commission for State aid clearance for a scheme which would be available to SME exporters hit in the run-up to Brexit and after Brexit takes place.

Similar rate

He said the loans would be similar to €150 million of funding recently made available via the State-owned Strategic Banking Corporation of Ireland (SBCI) to farmers. This funding is made available through AIB, Bank of Ireland and Ulster bank at a rate of 2.95 per cent.

If a similar rate is made available to SMEs it will be well below rates of 5 per cent typically available on SBCI funding, or higher rates available on normal commercial transactions.

Mr Noonan told an Oireachtas committee last week that outline approval was being sought from the commission, which must approve any such special lending.

While details are not yet known, sources believe that the loans are likely to be made available to companies hit by sterling weakness in the run-up to Brexit. The loans may thus be made available to certain sectors, or to SMEs located in certain regions of the country likely to be worst affected.

Tariff barriers

A study by the Department of Finance, published last year, said that rural parts of the country – and particularly the Border region – were likely to be worst affected by Brexit, particularly if it led to the erection of customs controls and tariff barriers.

The farming scheme is designed to help farmers hit by cashflow problems due to price and income volatility. It provides cheaper solutions than those available on the market, and this is also likely to be the focus of any scheme for SMEs.

The SBCI has some special funding from a European scheme aimed at SMEs, which is used for the farming scheme and could be used for the new funding programme. The loans are made available for up to six years, mainly as working capital support.