SFA voices lending concern

THE pending temporary credit guarantee scheme for the country’s SME sector — details of which are due to be finalised next month — can only work with substantial financial support of Government, according to the Small Firms Association (SFA).

At its annual conference in Dublin, yesterday, the association again welcomed the scheme, which was announced earlier this year and is due to run for a trial period of 12 months.

However, SFA chairman Ian Martin warned that it should address flaws in the market such as banks being too risk averse and not understanding innovative business ideas from small firms. The scheme is set to complement — rather than substitute — the existing lending activities of the banks, according to Government, but will be focused on new companies or those trying to develop new products or markets.

“The first and biggest challenge facing small businesses, at present, is access to credit,” Mr Martin said.

“The scheme should be open to all banks, be transparent and well-established under comprehensive financial regulation. Government involvement and a high subsidy by Government will be critical to its success,” he added.

Speaking at the conference, Enterprise Minister, Richard Bruton admitted that while the credit guarantee scheme and the new micro-finance facility will strengthen funding options available to SMEs and start-up firms alike, there are other gaps in the market for more credit options such as wider availability of risk capital for start-ups.

Minister Bruton said that banks need to “re-learn” their core businesses and their relevance to a small open trading economy; adding that they had lost the habit of lending to business.

“We need to recognise that we’re not prisoners of the past, of failed policies or of broken banks. We do have to seek to create a new future for ourselves. Enterprise will be the engine of recovery and we need to create an indigenous engine of recovery — through strong Irish companies — not just through foreign investment,” he added.