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Irish state backed loan schemes set to be expanded

The acting Irish government has moved to broaden the financial options for businesses looking to cope with the economic fallout from the coronavirus pandemic and is set to ramp up the offerings of both Microfinance Ireland and the Strategic Banking Corporation of Ireland.

The Microenterprise Loan Fund Amendment Bill 2020, approved by Government on Friday, will significantly beef up Microfinance Ireland, which provides low cost COVID-19 loans to the country’s smallest businesses.

It will also enable a significant expansion of the SBCI’s Future Growth Loan Scheme, which has proven extremely popular among SMEs.

The legislation will underpin a major expansion of the Microfinance COVID-19 Loan Fund which was launched on the 23rd March 2020.

Loans of up to €50,000 are currently available through Microfinance Ireland (MFI) with a six-month interest free and repayment free period.

In the two months since the launch of the MFI COVID-19 Loan Fund at the end of March, €11 million in lending has been approved to almost 400 small businesses across the country.

This is almost double the total loans of €6 million approved by MFI for the whole of last year.

The legislation will:

  1. Permit MFI to raise funding through the Strategic Banking Corporation of Ireland (SBCI). This will significantly strengthen their funding model and allow for access to relevant European Investment Bank (EIB) funding through SBCI.
  2. Increase the aggregate amount of Exchequer grants that can be given to MFI under section 5(2) of the Microenterprise Loan Fund Act from €35 million to €95 million
  3. Increase the legislative ceiling on outstanding borrowings by Microfinance Ireland from €25 million to €100 million

Announcing the news Minister for Business, Enterprise and Innovation, Cavan/Monaghan TD Heather Humphreys said: “The Microfinance Ireland Loan Fund has been a vital support for small businesses across the country. Demand has been exceptionally strong to date with almost 400 loans already approved for small businesses under the scheme. This represents a 600% increase on their normal activity levels.  I expect demand to increase further as more businesses begin their reboot. I have brought this legislation to Government today to make sure that I can continue to support small businesses with this funding for as long as they need it.” 

Microfinance Ireland (MFI) loans are a key component in the wider suite of supports being offered by the Government for businesses affected by the COVID-19 pandemic. They have a higher risk appetite than traditional financial providers and have assisted businesses across all sectors and throughout every region in Ireland.

  1. Expansion of Future Growth Loan Scheme

The Future Growth Loan Scheme, which was launched in 2019, provides loans of up to €3 million with terms of up to 10 years to SMEs including those in the farming and fishing sector.

There has been a rapid uptake of this €300 million scheme by SMEs with a broad reach across all sectors and regions ranging from exporting businesses to local family businesses.

The Government recently announced that an additional €200 million in lending would be made available through the Future Growth Loan Scheme.

Following further negotiations with the EIB Group, agreement has been secured to increase the ceiling of additional lending from €200 million to €500 million, thus enabling a much greater number of businesses to be supported.

An amendment to the legislation which underpins the scheme is necessary in order to secure the additional €500 million in lending through the scheme.

Minister Humphreys said: “The Future Growth Loan Scheme provides long term loans of 8-10 years to businesses at low interest rates. There has been huge demand for the scheme and this €500m expansion will allow us to further support the needs of SMEs including primary producers, impacted by COVID-19. The long-term nature of these loans is particularly important for businesses as they plan for recovery.

“The expansion of the Microfinance COVID-19 Loan Fund together with the €500m Future Growth Loan Scheme will provide further liquidity to SMEs as they work to reopen their doors and get back on their feet.

“Every effort has been made by my Department to get this legislation drafted and published as quickly as possible. The legislation is now ready-to-go and I hope that it can be enacted as quickly as possible once a new Government is formed so that businesses can get access to this vital liquidity.”

Minister for Agriculture, Food and the Marine, Michael Creed, T.D., said: “The Government is conscious of the challenges that are being faced by all businesses, including those in the agri-food sector. Our farmers, fishers and food companies are playing a vital role during the current pandemic, keeping quality nutritious food supplied to all our customers, both in Ireland and internationally.

“The agri-food sector, encompassing all the many aspects of agriculture, seafood and forestry, play a vital role in our economy, and are especially important in rural and coastal areas. Access to finance is vital, not only to get through the current crisis, but also to adapt and develop in the recovery phase.

“Small enterprises, including farmers, fishers and small food companies are eligible for Microfinance Ireland’s COVID-19 Business Loan and in light of strong and anticipated demand for this working capital facility, the extra capacity being announced is necessary and welcome.’

Criticisms of both schemes have ranged from the amount of paperwork required, to the time it takes to get deals over the line and in the case of the SBCI, the fact that their loans can only currently be accessed through the traditional banks, who don’t have the capacity to deal with the volume of queries.

The SBCI recently announced an open call from digital lenders to become partners of their fund so that may help. 🤞🤞