The Government's latest €400m initiative to boost credit to small and medium-sized businesses will succeed because demand for investment capital is rising as the recovery takes hold, Finance Minister Michael Noonan has said.
Mr Noonan admitted previous schemes to boost lending such as Microfinance Ireland have had a limited impact because businesses have not drawn down the funds.
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", Mr 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 new fund will be used to finance long-term lending to small businesses at cheap rates.
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.
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.
Mr Kenny said that supporting SMEs by ensuring access to credit on competitive terms is crucial to job creation.
Irish companies currently pay higher interest than their European peers, he added.