Easier access to loans for Irish SMEs, hopefully

MICROFINANCE LOANS will be offered through the government’s network of small-business support offices at lower interest rates in the hope more people will take up the the struggling scheme.

The rebranded ”LEO Microfinance loans”, worth up to €25,000 each, will be available to small businesses through the network ofD 31 Local Enterprise Offices (LEOs) around the country after a launch today.

The unsecured loans will be offered in partnership with Microfinance Ireland, a not-for-profit lender set up to deliver the government’s microenterprise loan fund to new or growing businesses with less than 10 staff.

The national microfinance scheme has been criticised for its slow rate of lending - offering only €4.8 million to small businesses in nearly two years out of the €90 million set aside for it to pay out over a decade.

Microfinance Ireland chief executive Michael Johnson told TheJournal.ie less people than hoped had applied for the loans, but there had already been an increase in traffic this year.

We think that the visibility of the Local Enterprise Offices in their areas and the awareness that they will build will indeed lead to an increase in application levels,” he said.

Johnson said the introduction of a reduced interest rate – a 1 per cent discount at 7.5 per cent - was not an admission the standard offering had been too high in the past.

He said clients were often unable to get financial backing from traditional lenders and cheaper loans generally needed security.

That’s unsecured, not insecure

Unsecured loans are considered much more risky than loans backed by collateral such as property and generally attract a higher interest rate.

Microfinance Ireland expects up to 250 new applications for the loans before the end of the year for a total value of €3.8 million if all go through at an average value of €15,500.

It forecasts the increased lending would support 500 jobs in Ireland.

But of course not all loans are getting through

About half the 475 applications Microfinance Ireland received by March had been approved, although today the organisation said the number of loans given the green light was now up to 308.

Johnson said it was expected that more applications would be successful under the new scheme as there was a higher success rate for businesses which did their paperwork with the help of LEO staff.

Small firms say cheers

The Small Firms Association said the loans would help small businesses in need of money or new businesses facing typical startup costs of between €15,000 and €17,500.

Director Patricia Callan said: “It should encourage many more people with good business ideas to take the risk and start up in business, as well as enabling those companies who may still be struggling to stay in business.”

 

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