Micro loans a major boost for small rural businesses

Rural-based companies and food producers, such as Adare Farm, Castlemine Farm, BK Fuels, and Veronica’s Snacks, have benefited from loans advanced by Microfinance Ireland, which works with businesses that have fewer than 10 employees and turnover under €2m.

They lend through the Microenterprise Loan Fund, to start-ups or micro-enterprises across all industry sectors.

Microfinance Ireland provides unsecured business loans of €2,000-25,000 for commercially viable proposals that have been declined bank credit.

Under a partnership between Microfinance Ireland and the Local Enterprise Offices, business loans are now available through the LEO network nationally.

These loans are three- to five-year terms, at a reduced interest rate of 7.5% (7.8% APR) for LEO clients, with flexible repayment terms.

LEOs provide assistance and feedback on loan applications, in addition to their business advice and support.

Sole traders, partnerships, and limited companies are eligible to apply to Microfinance Ireland for loans to fund business start-up (for purchase of stock, equipment, machinery and business vehicles, for example).

Existing enterprises can also apply.

Micro Finance also offers loans of €1,000 to €5,000, in conjunction with Local Development Companies, for items such as working capital, set-up costs, and equipment or vehicle purchase (one- to three-year terms, fixed monthly repayments at 8.8% APR, which is the normal Microfinance Ireland rate, fixed for the term of the loan).

n Microfinance Ireland also lends to primary agri-producers (farmers), but only to a maximum of €15,000 under current de minimis rules. (Under the EU’s agriculture de minimis regulations, the primary agriculture limit is €15,000 over any rolling, three-year period.)

How is Microfinance Ireland different to a bank?

Like a bank, we offer interest-bearing loans, but, unlike a bank, we operate on a not-for-profit basis.

Helping to create or sustain a job is at the heart of our business. We recognise that some businesses may have difficulty in accessing credit from banks, due to economic difficulties, or for reasons such as lack of security, current level of bank debt, difficulty with existing borrowings, or lack of a track record.

Microfinance Ireland has been initiated by the Government to provide another funding avenue to assist people who are finding it difficult to access credit, which, in turn, will help to create and sustain employment.

Are there other charges involved?

We do not have any charges or fees associated with our loans. We do not charge any arrangement or set-up fees, and we do not impose early-redemption penalties for businesses wishing to pay off their loans early.

How long does it take to process an application?

When we have received your application, with all of the supporting documentation, the average processing time is 10 days.

What business finance needs do you not consider?

We do not fund costs associated with research-and- development.

Is a deposit or security required for the loan?

No. Our loans are unsecured. It is important to note that if a sole trader or partnership borrows from us, they will be personally liable for the loan.

When we lend to a limited liability company, we will require the directors and/or shareholders to provide us with a personal indemnity for the amount borrowed, which is similar to the sole trader being personally responsible for the repayment of the loan.

What if my credit history is not good, due to difficulties with my mortgage, other personal debt or business debt?

Lack of a clean credit history does not preclude you from applying to us.

We are all about supporting viable business and helping job creation.

If you have problems with existing debts, you need to tell us about them, and what arrangements you have made to help address these debts with the relevant financial institution.

We will require evidence of this.

If you can demonstrate that you are dealing with your current debts, and your business has the capacity to repay a new loan, then we are willing to consider your application.

My bank is willing to approve some of my loan application, but there’s a shortfall. Would Microfinance Ireland be willing to part-fund or provide the balance of the loan needed?

Yes. We would be happy, with your permission, to link in with your bank and work with them to ensure the right loan support for your business.

What evidence do you require of a bank decline?

We will accept bank-decline letters that have been sent directly to you.

Or, if you have discussed your business-finance needs with your bank, and have been advised that your application will not be successful, then you can complete the bank-decline section on our application form, giving us details of this discussion with your bank.