Business loan scheme falls €500m short

The Credit Guarantee Scheme, one of the government’s key measures to support small and medium-sized businesses, has helped just 5 per cent of the companies envisaged when it was launched four years ago.

Under the initiative, the government guarantees 80 per cent of the value of loans approved by domestic banks as a means of improving SMEs’ access to credit. Bank of Ireland, AIB and Ulster Bank are the scheme’s participating lenders.

The programme is intended to support businesses that either do not have enough collateral to secure a loan or which operate in sectors “unfamiliar” to the banks.

When the scheme was launched in October 2012, the department of jobs estimated that it would facilitate an additional €150 million worth of lending each year. Every €150 million of new lending was expected to benefit more than 1,800 businesses and create more than 1,300 jobs.

However, figures released by Mary Mitchell O’Connor, the jobs minister, showed that just 385 additional loans have been sanctioned in the first four years of the scheme.

Based on the target of helping 1,800 businesses per year, the department had anticipated that more than 7,000 would have used the scheme by now.

The total value of loans approved to date is €62 million. Of this, approximately €17 million has been drawn down. The department’s initial targets estimated that €600 million would have been lent to SMEs by now.

A review of the scheme was launched in 2013 after the muted take-up from businesses. The review recommended extending the scheme to a wider range of financial products such as leasing and overdrafts and increasing the guarantee to 80 per cent from the previous limit of 75 per cent.

Neil McDonnell, the Irish Small and Medium Enterprises chief executive, said that the scheme remains too difficult to access despite the changes introduced.

“[The issue] is the ability of the little businesses to get their hands on them. So they apply and go through the routine and it’s getting the sign-off on the loans that’s the issue. One of the biggest complaints I’m getting from members is that either it’s taking too long or they’re getting multiple refusals.”

A spokesman for the Department of Jobs said that about 2,550 jobs had been either created or maintained as a result of the scheme. The level of lending would continue to be market-led, the spokesman added.