€3bn loan package offers a lifeline to struggling SMEs
DETAILS of a €3bn loan package aimed at small and medium-sized (SME) businesses are due to be made public shortly, after Bank of Ireland and Allied Irish Banks (AIB) finalised plans for the Department of Finance over the past few days.
The Irish Independent understands that the two institutions had been asked within the past couple of weeks to provide additional clarity on plans already submitted to the department, in terms of the specific sectors and geographies to be targeted by the loan packages.
It's likely that the plans, which cover 2010 and 2011, will be published within the next couple of weeks and could provide a lifeline to hundreds of SMEs throughout the country that have been starved of credit, putting their future on the line.
ISME, the organisation that represents small and medium-sized businesses in Ireland, has recently claimed that 55pc of such companies that applied for funding within the past three months have been refused credit by their banks. In an ISME survey, 82pc of firms said banks were making it more difficult for SMEs to get finance, while 12pc said family homes had been sought as collateral.
John Trethowan, the former National Irish Bank executive who now heads up the Government's Credit Review Office, has also examined the new proposals from the banks.
News that the loan packages are about to be finalised comes as the Irish Business and Employers' Confederation (IBEC) said today that business confidence strengthened in the second quarter of 2010 for the third consecutive quarter, but cautioned that recovery is stronger in the exporting sectors than in the domestic economy.
The IBEC business sentiment survey shows that more Irish companies than before are expecting a dip in domestic sales in the coming three months. IBEC maintained that while the domestic economy remains fragile, the reduction in the number of firms expecting a substantial decrease in domestic sales "is a further sign of stabilisation".
Figures released last week by the Central Statistics Office showed that Ireland technically emerged from recession based on a relatively weak gauge that showed one quarter of gross domestic product (GDP) growth in the first three months of the year. However, gross national product (GNP), which excludes profits made by multinationals, slipped 0.5pc in the first quarter. It's seen as a more reliable barometer of economic health.
IBEC senior economist Fergal O'Brien said the latest business sentiment results, coupled with the latest national accounts data, point to the "two-speed nature" of the economic recovery. "The continued weakness in the indigenous sectors of the Irish economy highlights the need for government initiatives to underpin domestic demand."
Just 6pc of companies expect their order books to increase in this quarter, down from 11pc in the first quarter of the year.
- John Mulligan
Irish Independent
