Access to finance for SMEs is a key aspect of the Action Plan for Jobs 2013. It is the Government’s vision that all viable businesses operating in Ireland should have the opportunity to access sufficient finance to meet their enterprise needs in a manner that supports growth and employment in the economy. The working capital requirements of many SMEs are often fulfilled by short term credit in the form of overdrafts or short term loans. The Government has imposed SME lending targets on the two domestic pillar banks for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion last year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks have achieved their 2011 and 2012 targets and the recent Credit Review Office report commented “At the end of quarter 1, both banks’ sanctions are on or near where they would be expected to meet the target, taking account of the seasonality which has been identified over the past two years.”
The pillar banks are expected to lend to viable businesses both for investment and working capital purposes. The Credit Review Office is available to assist businesses which have been refused credit. The recent CRO report shows that the Credit Review Office upheld the credit appeal in 135 cases or 57% of cases decided. The upheld appeals have resulted in €16.8M credit being made available to SMEs and farms, protecting 1,297 jobs. This shows that there is a strong prospect of success for SMEs going to the Credit Review Office and I would strongly encourage SMEs refused credit to seek a review by the Office.
The Government has taken a number of actions, particularly where SMEs have been refused credit, to improve the situation in relation to credit availability to SMEs.
The Temporary Partial Credit Guarantee scheme addresses the situation where the SME is outside the risk appetite of the banks. This can arise because of the SME’s lack of collateral or the banks’ lack of understanding of the business model, the market, the sector or the technology. The three main SME lenders are all participating in the Guarantee scheme.
The Microenterprise Loan Fund Scheme will provide loans of up to €25k to start-up, newly established, or growing microenterprises employing less than 10 people, who have commercially viable proposals that do not meet the conventional risk criteria applied by banks.