Flexible finance will be available next month
IFA President Eddie Downey last week welcomed access for the farming and agri-business sector, through the main banks, to the Strategic Banking Corporation of Ireland’s (SBCI) €400m low-cost loan fund.
He called for the loans to be flexible, easy to access, with lower interest rates than are currently available, and to cater for variable scales of investment on farms.
Mr Downey said the SBCI funding will be available from early March, for between two and 10 years. He said one of the pillar banks has confirmed to IFA that they will offer money from the fund at 4.5%.
The SBCI will initially offer SMEs long-term working capital and capital investment finance through a number of lending partners, initially AIB and Bank of Ireland. The SBCI will also support agricultural investment finance through its on-lender partners.
The SBCI is working with its first lending partners to roll out its initial products. It is anticipated that SBCI products will be available through its on-lender partners by March 9, 2015.
A full public awareness campaign will be conducted to raise awareness of products as they are launched.
You can apply for an SBCI loan from our initial lending partners AIB and Bank of Ireland.
The terms of an SBCI loan may be more flexible than those currently available, including longer maturities and payment flexibility (subject to credit approval). An SBCI loan will benefit from the ‘pass through’ of reduced funding costs directly to the SME borrower.
Repayment flexibility makes investment more attractive to SMEs, as the first repayments of a loan may be delayed to match the revenue generated from the investment, rather than beginning repayments the month after the loan is drawn down.
This encourages investment, as the positive cashflow from an investment can be better matched to the loan repayments. Repayment flexibility will be subject to the credit approval by individual lending partners.
As the SBCI will not lend directly to SMEs but through bank and non-bank funders, it will rely on their branch networks to reach SME borrowers. It will operate as a funder to the sector to ensure that the SME finance market has a diverse range of finance providers and products that meet the needs of SMEs.
This approach gives the SBCI access to multiple branch networks and in turn, SMEs in all parts of Ireland will have access to SBCI products.
The SBCI is based on a well-established and successful European ‘on-lending’ model that is used by Germany’s KfW and Spain’s ICO.
The SBCI’s role is to promote and support competition in the SME finance market. Rather than compete directly with SME finance providers, the SBCI will fund and design product programmes to be distributed through its lending partners.
SBCI products will only be available through lending partners that have concluded agreements with the SBCI. Full details of the lending partners will be provided as and when partners sign agreements with the SBCI.
SBCI products and the lending partners who distribute each particular product will be listed on the sbci.gov.ie website. SBCI will issue updates as new providers are added.
SBCI loans will be available to the full range of SMEs from micro one-person enterprises to medium- sized businesses.
An SME can borrow up to €5 million, which is likely to cover the needs of most Irish SMEs.
The European Commission and Irish definition of SMEs is ‘Enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding €50m and/or an annual balance sheet total not exceeding €43m’.
All lending partners have to demonstrate that the financial benefit arising from SBCI funding is passed on to SMEs. This is part of their terms and conditions with the SBCI. The SBCI also has to show KfW and the EIB that the financial benefits are passed on to SMEs.
