TWO government departments are at loggerheads over plans to guarantee loans for struggling small- and medium-sized enterprises in an attempt to help them survive the credit freeze.
Tanaiste Mary Coughlan said yesterday that she will put proposals to a cabinet committee in the coming weeks that are designed to boost bank lending to the SME sector.
"It will be based on a pool of money which will be made available," she said.
Ms Coughlan added that the cost would depend on the premium charged for the service, as well as the rate at which businesses default on their loans.
Four Irish companies failed each day last year.
But the Department of Finance said last night that it was against any further guarantees, following on from the bailout of the banks in 2008 and the introduction of the National Asset Management Agency (NAMA) scheme.
"While we can't comment on any specific scheme because we haven't seen one," said a spokesperson, "we want to limit government exposure to guarantees and would want assurances that any scheme would be targeted at genuine businesses."
It is understood that the Department of Finance already had concerns that any such scheme could result in banks lending to businesses without taking proper account of risk.
Ms Coughlan admitted that the Government is still having difficulty in getting banks to free up lending. She also admitted that the credit squeeze is likely to get worse as banks encounter more lending problems on interbank markets, following on from the recent downgrade of the sector by rating agency Standard & Poors.
Figures released yesterday showed a 54pc hike in the value of unpaid debt going though the Irish courts to €36.4m in 2009, despite a drop in the number of judgements.
SME-support bodies, such as the Irish Small and Medium Enterprises Association (ISME) and the SFA, have long said that banks' refusal to lend to the sector was threatening the viability of many firms.
"Getting credit going again for viable businesses is the key," ISME chief executive Mark Fielding said. "There are many marginal loan applications just shy of getting funding and they are being refused because of that. If there was a guarantee scheme, these businesses would get funding and would survive."