Government supports for SME Credit

The challenges posed by Brexit make the current range of government supports for small and medium enterprises (SMEs) even more vital.

State backed, appropriately priced, flexible credit can assist SMEs to restructure their cost bases and re-price their products and services, so that they can continue trading with the UK in the weaker Sterling environment.

Loans made to SMEs, on the basis of viable business plans, can also give them the opportunity to diversify into other markets and reduce their exposure to the UK.

The strategic mission of the Strategic Banking Corporation of Ireland (SBCI) is to deliver effective financial supports to Irish SMEs that address failures in the Irish credit market. It also has a mission to drive competition and innovation, and ensure the efficient use of available EU resources.

The SBCI uses an on-lending model; this means it does not lend directly to SMEs. Instead, it facilitates the provision of flexible, appropriately priced funding to Irish SMEs through partner finance providers, known as on-lenders.

The SBCI currently has three bank and four non-bank on-lenders.

To the end of December 2017, including the Agriculture Cashflow Support Loan Scheme, the SBCI has supported the provision of loans totalling €920 million to 22,962 Irish SMEs. This has supported the employment of 119,392 people.

The SMEs who received SBCI finance are from a variety of sectors and there is a broad geographical spread. Approximately 86% of them based outside Dublin.

The SME sector is a key element of ISIF’s investment portfolio. It addresses both debt and equity investment needs. To ensure efficient delivery of funding to the SME sector, ISIF partners with private sector entities that interface directly with SMEs.

Through its investments in SME funds and platforms, ISIF provides:

• flexible term debt
• asset backed finance
• venture debt
• growth equity
• buyout equity – filling funding gaps and providing scaling capital for businesses

At end-2016, SME had committed €385 million to a number of funds/platforms providing senior debt, junior debt, asset finance and equity investment to SMEs.

In addition, ISIF also held commitments of €410 million to venture capital funds.

Enterprise Ireland provides funding and supports for SMEs and larger companies who wish to expand their activities, improve their efficiency or grow their international sales.

The Microenterprise Loan Fund, administered by Microfinance Ireland, provides support in the form of loans for up to €25,000.

The loans are available to start-up, newly established, or growing micro enterprises that employ less than 10 people and have viable business propositions.

This is a cross-government initiative containing over 170 state business supports from 30 different government departments, agencies and initiatives available to SMEs.

By answering 8 simple questions, SMEs will receive a list of available Government supports specific to their business. Members of the SME State Bodies Group and specially trained Jobs Ambassadors attend relevant events to promote the Supporting SMEs online tool and engage with SMEs on the ground.

In February 2017, the Strategic Banking Corporation of Ireland (SBCI) launched a €150 million Agriculture Cashflow Support Loan Scheme for farmers, which was announced in Budget 2016, on behalf of the Department of Agriculture, Food and the Marine.

The scheme provided low cost, flexible loans to farmers to ensure that the primary agriculture sector had adequate support to deal with income and commodity price changes.

The Agriculture Cashflow Support Loan Scheme provided unsecured loans of up to €150,000 for a term of up to 6 years at a fixed interest rate of 2.95 per cent.

As well as being supported by government funding, the scheme was also supported by:

• a guarantee from the SBCI
• a COSME counter-guarantee facility from the European Investment Fund (EIF)
• EU exceptional adjustment aid

The scheme operated from January 2017 to end-September 2017.

To the end of December 2017, under the Agriculture Cashflow Support Loan Scheme, €145 million of loans were drawn down by 4,246 SMEs supporting 5,893 jobs.

The average loan size was €34,130.

Find out more here

The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial government guarantee to banks against losses on qualifying loans to eligible SMEs.

The scheme is operated and managed by the Strategic Banking Corporation of Ireland (SBCI). A revamped scheme will be launched towards the end of 2018. It will offer more flexibility with the aim of increasing access to a variety of financial products for SMEs.

Further information is available on the Department of Jobs, Enterprise and Innovation website here

In 2014, 31 LEOs were established as the first-stop-shop for those beginning a new business and those wishing to expand their existing one.

They offer direct financial aid, as well as other supports such as mentoring, advice and onward referrals to other support providers.

As announced in Budget 2018, the SBCI launched a €300 million Brexit Loan Scheme, in partnership with the Department of Business, Enterprise and Innovation, the Department of Agriculture, Food and the Marine.

The purpose of the scheme is to provide working capital loans to assist Irish SMEs and small Midcaps, to adapt their businesses and diversify, change and innovate in response to Brexit.

This scheme is supported by an InnovFin SME Counter-Guarantee Facility, with the financial backing of the European Union under Horizon 2020 Financial Instruments, and Government funding of €14 million from the Department of Business, Enterprise and Innovation, and €9 million from the Department of Agriculture, Food and the Marine.

The scheme is open to all SMEs and Midcaps with less than 499 employees that are viable but vulnerable and exposed to the impact of Brexit.

Due to InnovFin conditions, the scheme is not available to primary producers in the agricultural sector or to the aquaculture sector.

The Scheme will provide loans of €25,000 to €1.5 million at a maximum interest rate of 4 per cent with a term of 1-3 years to eligible enterprises.

Loans of up to €500,000 will be unsecured. The scheme will be in operation through AIB, Bank of Ireland and Ulster Bank until March 2020, or until the scheme has been fully subscribed.

Find out more here