The State’s new ‘SME Bank’ — the Strategic Banking Corporation of Ireland — is likely to begin lending within the next quarter, Jobs and Enterprise Minister Richard Bruton, said yesterday.
He was addressing the Joint Oireachtas Jobs Committee, outlining planned changes to the Credit Guarantee Scheme — new legislation for which he said the Government hopes to get passed by the Dáil “as quickly as possible” in the autumn session.
The Government undertook an independent review of the scheme last year — following a lower-than-expected reaction, in terms of application volumes.
Mr Bruton said that since its launch in 2012, the scheme has supported additional lending of around €15m to 110 companies and has had a “surprisingly strong” impact on jobs, with 870 positions either being maintained or created on the back of company involvement.
The new changes are emerging after it was found that the scheme wasn’t overly attractive to banks because of the balance of risk they were being burdened with and the narrow terms of the programme.
Currently, the scheme provides lenders with a government guarantee of 75% of a loan’s value if defaulted on by the borrower. Under the new proposals that will now be increased to 80%, the maximum length of the guarantee will extend from three to seven years, there will be a more equal share of risk between lender and government and a wider range of financial products offered. More providers — not just the main banks — will also be eligible to partake.
Mr Bruton noted that while fewer SMEs were looking to borrow and the banks were more risk averse, there were few signs — other than a marked drop in loan refusal rates — of a significant recovery in credit flow to small businesses.
He also agreed with certain committee members’ views that the main banks have lacked adequate staffing skills to deal with SME credit applications, but there are signs that they are becoming more engaged with SMEs.
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