The Budget statement contained a number of measures designed to stimulate the SME sector. Some of the key changes announced were:
• Increasing the amount of expenditure eligible for the Research and Development tax credit.
• Additional corporate tax relief for start-up companies.
• Extending the foreign earnings deduction for employees working in a number of countries in Africa.
• Extending the Employment and Investment Incentive until 2020.
These measures on their own are modest (which Finance Minister Michael Noonan admitted) and are unlikely to significantly stimulate the SME sector on their own. That is not to say these measures will not be of interest to SMEs.
The key issue affecting the SME sector is the lack of credit. To recognise this reality, Mr Noonan has announced significant credit measures which are important and have the potential to make a real difference.
Currently, the Credit Review Office (CRO) helps SME or farm borrowers who have had an application for credit to the pillar banks of up to €500,000 declined or reduced.
In the Budget statement yesterday, it was announced that the CRO has published a new guidance document to assist SMEs accessing finance from banks.
By far the most significant measure however, is the provision of additional funding supports which include the following:
• Micro Finance Fund – €40m available in five years.
• Loan Guarantee Scheme – €150m per annum available over three years.
• Enterprise Ireland – upwards of €200m in 2013.
• European Investment Bank, European Investment Fund (€80m through AIB) and Silicon Valley Bank in partnership with the National Pensions Reserve Fund (NPRF) ($100m over five years).
• Revised lending targets for the two pillar banks for 2013.
• NPRF will launch a range of support funds of €100m to €400m to provide equity, credit and recovery investment to certain SME sectors.
Two of these deserve special mention. Firstly, the work being done by Enterprise Ireland – both financial support and helping SMEs to develop into global markets – has been an unrivalled success.
Secondly, work by the NPRF to support the Irish infrastructure through its investment strategy has not received anything like the praise it deserves.
Michael Hayes is a tax partner with KPMG