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SMEs to benefit from €400m funding launch

Small and medium enterprises will next month have access to €400m worth of funding after the launch yesterday of the long-awaited Strategic Banking Corporation of Ireland (SBCI).

The first tranche of the SBCI’s €800m reserves will be made available through the pillar banks, AIB and Bank of Ireland, with other lenders expected to come into play later in the SBCI’s lifetime.

The initiative is funded through a combination of the European Union’s lending arm — the European Investment Bank (EIB); the Ireland Strategic Investment Fund (ISIF), and German promotional bank KfW.

Loans accessed through the SBCI come at a discount, bringing capital available to Irish SMEs closer to the the cost of borrowing elsewhere in Europe.

Three initial products have been made available, including:

SBCI SME Investment and Working Capital Loan — which offers a discounted interest rate and loan amounts up to €5m for periods between two and 10 years.

Facilities to Re-finance Exiting Banks — offering refinancing options to those SMEs whose bank loan facilities originated with banks which are exiting the Irish market

SBCI Agriculture Investment Loan — which is available to support investment by agriculture SMEs involved in primary agriculture production, the processing of agriculture products or the marketing of agriculture products.

“Irish SMEs have been paying more to borrow than similar businesses across Europe. The SBCI products we are bringing to market are designed to address this in a simple and SME-friendly way,” SBCI chief executive Nick Ashmore said.

“However, this is just the start of the SBCI’s work in filling a major gap in addressing the needs of SMEs. Today’s first phase is about using existing lenders to distribute new, SME-friendly loans as widely as possible.”

AIB will distribute SBCI funds at a flat rate of 4.5% — thus cutting an additional 1% off its standard variable business rate, which matches the 1% SBCI discount.

Bank of Ireland will also pass discounts onto customers, offering rates ranging from 3.7% to 6.34%.

The launch was broadly welcomed by groups including Chambers Ireland and the Irish Small and Medium Enterprises Association (ISME).

ISME chief executive Mark Fielding warned, however, lending by the two banks must be carefully monitored to ensure funds are distributed to the benefit of SMEs and not lower risk, larger corporations.

Fianna Fáil jobs and enterprise spokesperson Dara Calleary dismissed the launch as a “reheated announcement” that will not inspire confidence in the business community.

Businesses employing fewer than 250 workers, with an annual turnover not exceeding €50m and/or an annual balance sheet greater than €43m, are eligible.

The SBCI’s funding was previously announced in October with legislation allowing up to €5bn to be made available over the next five years.

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