Dáil Éireann Debate, Thursday - 3 July 2014
11. Deputy Peadar Tóibín asked the Minister for Finance the up-to-date drawdown of the seed capital scheme; the number of small and medium enterprises that have had their review to the CRO upheld; the financial value of these positive reviews; and the number of jobs that have been created by each of these initiatives. [23805/14]
View answerThe Minister is aware of the sharp reduction in the level of lending to businesses in recent years. Even three years into the term of the Government lending to businesses is flat at best. Lending, private investment and public investment are at an all-time low in the State, leading to major problems with regard to jobs. The CRO was meant to be the knight in shining armour to crack the whip to help resolve this issue. My question seeks to ascertain how successful that is.
For the period 2003 to 2012, some 601 companies availed of the seed capital scheme with a cost to the Exchequer of €19.6 million. Provisional figures for 2013 suggest that 65 companies availed of the seed capital scheme at a cost of €1.3 million to the Exchequer. It is not possible to provide both of these figures for all years since the inception of the scheme without a more detailed review of the Revenue Commissioners' records. I do not have data on the number of jobs created by this initiative. The Action Plan for Jobs 2014 contains a commitment for my Department and Revenue to review and consider further amendments to the seed capital scheme this year.
The Deputy should note I am aware that there remains an issue regarding an equity-funding gap for SMEs. My Department chairs a working group consisting of stakeholders from both the public and private sectors which is examining this issue with a view to producing recommendations which will assist in this regard.
I am informed by the Credit Review Office that the upheld appeals have resulted in €27.5 million in credit being made available to SMEs and farms, helping to protect or create 1,850 jobs. The CRO is currently overturning 55% of the refusal decisions referred to it. I encourage SMEs that have been refused credit by the banks to avail of the services of the office.
There are healthy functioning companies for which an element of their business would be toxic debt. That toxic debt is dragging down the functioning element of the business and is preventing the business from investing in the future if the business is lucky enough to survive and is stopping it from creating jobs. However, in other cases it is putting businesses out of business. Tomorrow I will visit a firm in County Carlow, Dan Morrissey Ireland Limited, a quarry with €8 million of business on its books but has had difficulties with AIB. AIB is calling in the debts which could possibly lead to the loss of 130 jobs in the area. That is one element of it.
We have a whole ecosystem of new finance tools the Government has introduced - I commend the Government on making an effort on that. However, they are not working and the percentage of the drawdown is still a very long way from meeting the objective. The central issue here is the Government's policy and telling the pillar banks to operate properly with businesses and to deliver in lending.
The only objective evidence we have, rather than simply relying on bank data, is from the RED-C polling company. It surveys SMEs to ascertain the availability of credit and the trend is towards improvement. The last survey showed that just over 80% of SME applications for loans resulted in the loans being granted. That still means one in five is being refused, which is high, but the trend is improving.
There are different demands in different companies. Many companies just need working capital on a 12-month rollover basis. Others need term loans of two years, three years or even up to five years, which they also get from the banks. However, increasingly, small companies want to expand and may need money for ten years. What we are putting in place now with the new strategic investment bank will fill that particular need.
We are fully aware of the problem which has not gone away, but the situation has improved significantly. One of the root causes of the problem was that many SMEs in boom times departed from their core business and got involved in property plays and it was the property play that dragged the core business down. The banks are now trying to restructure companies so that they are parking the property aspect and allowing them to have the capital necessary to continue with the core business which was viable all the way through but was being dragged down.
I agree with the Deputy's general point of view. We are working on it. We have not succeeded yet, but we have improved it significantly.
