Fund to make €5m loans available to SMEs with fewer than 250 employees
The Government's latest €400m initiative to boost credit to small and mid size businesses will succeed because demand for investment capital is rising as the recovery takes hold, Michael Noonan said yesterday.
The Minister for Finance admitted previous schemes to boost lending such as Microfinance Ireland have had a limited impact because businesses have not drawn down the funds available.
He was speaking at the launch of a €400m fund that will provide money from the State's new Strategic Banking Corporation of Ireland (SBCI) to businesses including farms through AIB and Bank of Ireland.
Demand for capital is now growing, and the launch of the new state investment bank will be seen in the future as a "red letter day," Michael Noonan said.
Businesses are now more likely to tap into the funds because of the improving economy, which was boosted by this year's "slightly expansionary budget," the positive effect of lower fuel prices and looser money policies from the European Central Bank, he said.
The Government's most senior leaders attended the launch of the new fund that will be used to finance long-term lending to small businesses at cheap rates, yesterday.
Around half the funds are earmarked to refinance businesses that have struggled to replace loans originally from lenders such as Anglo Irish Bank and Danske Bank that shut or pulled out of the market here following the financial crash. Businesses that want to find alternative lenders after their debts have been bought by US funds as banks pulled out will also qualify for such loans.
The new SBCI fund is the first in Ireland launched with financial support from Germany's federal strategic lender KfW following a deal back in 2013 between Enda Kenny and German Chancellor Angela Merkel.
Taoiseach Enda Kenny, Tanaiste Joan Burton and ministers Michael Noonan and Brendan Howlin launched the fund at Dublin's Liffey Trust, a hub for growing companies.
The newly appointed chief executive of the SBCI Nick Ashmore also spoke at the event.
Enda Kenny said that supporting SMEs by ensuring access to credit on competitive terms is crucial to job creation.
"Most families are only now just beginning to feel the benefits of the recovery, which remains fragile and incomplete," he said.
Irish companies currently pay higher interest than their European peers, he added.
Tanaiste Joan Burton said that signs of economy recovery are being seen especially in the Dublin region, but that without a healthy SME sector small towns would be relegated to becoming dormitories for workers commuting to cities.
Meanwhile, AIB is close to finalising a short list of internal and external candidates for the chief executive post.
"It is absolutely in the national interest that this post is filled with the best candidate," Michael Noonan said.
There will be no political involvement in the selection process, he added.