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 EU Finance Day for SMEs reveals:
- Irish banks have not sought to avail of EU financial instruments to assist SMEs
- Risk-averse nature of banks means government intervention necessary
- Government must stop being part of the problem delaying payments to small businesses
The EU Finance Day for SMEs took place on Tuesday, 16th June in Dublin, and the EU Commission used the opportunity to highlight the financial instruments it is making available to SMEs under the Competitiveness and Innovation Programme. “Unfortunately, this money is only available through financial intermediaries, aka banks, and thus far not one Irish bank has drawn down the money”, commented Patricia Callan, SFA Director. The SME Guarantee Facility (SMEG) has a fund of €506mn available to give to banks around Europe, through the European Investment Fund (EIF), to provide an SME loan guarantee scheme of 50% of the potential losses of a particular portfolio of loans from a given bank, and in the case of micro-credit (loans up to €25,000), a guarantee rate of 75% in the event of losses. “This instrument should be widely used by banks, as it clearly allows them to make decisions in a less risk averse way, as that risk is being shared with the EIF. This should allow them back more businesses and/or reduce the collateral and conditions they set with particular clients, to enable them to drawdown the money they desperately need”, commented Callan.
“However, just like the funds available through the European Investment Bank (which took until March this year to draw-down), the Irish banks are the laggards of Europe and this is simply unacceptable to the small business customers, they should be striving to support!”
The SFA renewed its call for direct intervention by the government to establish its own economy-wide ‘Small Business Loan Guarantee Scheme’, “as there is clearly a market failure in relation to SME access to finance and the banks curtailed to operating credit policies that are completely risk-averse will not solve the problem by themselves”, stated Callan. “Unless we are reconciling ourselves to seeing more and more jobs lost and an implosion in the number of businesses shutting down, we clearly need action, not more analysis, by Government immediately”.
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