Credit Guarantee Scheme expected to dominate SME lending this year

Former 123.ie managing director Niall O'Grady has been appointed CEO of alternative lender Linked Finance. 

Loans underwritten by the Government’s €2bn Covid-19 Credit Guarantee Scheme are likely to dominate SME lending for the first half of this year, at least, according to the new head of alternative lender Linked Finance.

However, experts have – in the past – warned the scheme may be of little help to many smaller businesses because it is much more expensive for borrowers than Britain's version.

Former 123.ie managing director and Permanent TSB commercial director Niall O’Grady has joined Linked Finance as chief executive. Linked Finance is one of the biggest lenders to small and medium-sized businesses outside of the main retail banks.

Mr O'Grady said since becoming the first non-bank lender to sign up to the guarantee scheme at the start of January, Linked has funded more than €3m worth of loans to SMEs. He said the bulk of that has been funds underwritten by the Credit Guarantee Scheme.

The scheme sees the State guarantee 80% of money lent by financial firms to SME customers.

Mr O'Grady said the trend of Government-guaranteed funds being used for SME loans is likely to continue, at least until the third quarter of this year. He said Linked Finance's strong lending start to the year doesn't indicate widespread SME recovery.

Since its establishment six years ago, Linked Finance has lent about €143m to SMEs. Mr O'Grady said the company should be closer to an aggregate amount approaching €200m by the end of this year.

Meanwhile, Microfinance Ireland (MFI) – the Government’s small business lending vehicle – said it handled a record level of loan applications and approvals last year. It said 67% of the €27m it loaned was to businesses in need of support due to the pandemic.

Elsewhere, a survey by small firms group Isme has shown the biggest concerns of its members are the economic uncertainty and the fallout from the Covid lockdown.