The European Investment Fund (EIF) is to guarantee lending to very small companies, in a new scheme aimed at creating nearly 8,000 jobs.
In a statement, the EIF said it had signed a guarantee agreement with Microfinance Ireland aimed "at supporting micro-enterprises and self-employed entrepreneurs in Ireland".
The guarantee is part of a plan to provide credit of up to €25,000 to companies with fewer than 10 staff who ordinarily would not be able to get credit from the banks.
The scheme is aimed at existing and start-up businesses with less than 10 employees and a turnover of less than €2m.
Under the plan, loans can be used towards start-up costs, expansion plans or general working capital. The measure, which will last a decade, should assist about 5,500 micro businesses, creating about 7,700 new jobs, said Microfinance Ireland.
The guarantee is being given by Progress Microfinance – a scheme managed by the EIF backed by €203m worth of funding from the European Commission and the European Investment Bank.
The facility was set up to back lending to companies that can't get funding through other channels.
It focuses, in particular, on female entrepreneurs, young entrepreneurs, entrepreneurs belonging to a minority group, those with a disability and sole traders.
Unlike a traditional lender, however, Progress Microfinance does not lend directly to businesses, instead companies will have to apply to Microfinance Ireland for the funding.
The move is the latest guarantee involving Europe for extending credit to small firms. Last month, Ireland signed on to a Risk Sharing Instrument aimed at financing R&D.
EIF chief executive Richard Pelly said the agreement would help "scale up support for micro-enterprises across the country".
"This long-term funding will help to benefit micro-enterprises and help them grow at this crucial time."
Minister for Research and Innovation Sean Sherlock said he was "delighted" to have the deal agreed.
Meanwhile, a "National Business Expo" is to take place in the RDS on March 8 and 9 aimed at supporting Irish entrepreneurs and helping them "accelerate" their business.
The event will feature "practical advice with an emphasis on start-ups, small to medium businesses and companies looking to export".