Slow uptake of €300m Brexit loans
Only €8.5m of a €300m Brexit loan scheme launched last March has been sanctioned.
In sharp contrast, the €150m Agriculture Ca flow Support Loan Scheme for farmers in 2017 was fully committed after one month. Minister for Business, Enterprise and Innovation Heather Humphreys revealed last week that only 224 Brexit loans had yet been approved by the Strategic Banking Corporation of Ireland (SBCI), and only 38 had progressed to sanction at bank level (totalling €8.5m).
The sche ffers affordable working capital for up to three years to eligible, Brexit-impacted companies with up to 499 employees. Participating finance providers are the Bank of Ireland, Ulster Bank and Allied Irish Bank.
A year previously, more than 4,200 farmers availed of the €150m Agriculture Cashflow Support Loan Scheme (average loan of about €34,000). It addressed the impact of sterling exchange rate fluctuation arising from Brexit, and of lower farm commodity prices in 2016. It offered working capital funding at an interest rate of 2.95%. Uptake has been low of the €300m Brexit loan scheme (maximum interest rate 4%), despite at least 40% of it being earmarked for food companies. Only about 4% of applications were unsuccessful.
In the Dáil, Ms Humphreys said: “Businesses must consider carefully whether they want to take up the offer of finance. The Government is providing an array of supports to businesses through Departments and agencies, but ultimately businesses have to decide themselves whether they want to avail of the supports.” She noted that the interest rate of 4% or less is attractive, bearing in mind that the interest rate for new business loans in Ireland was double the eurozone average rate throughout 2017.
The Government will be hoping for a much bett response when it launches the Future Growth Loan Scheme in 2019. It was announced in the recent budget as a loan fund of up to €300m available to Irish businesses for terms of 8-10 years, including farmers, the seafood sector and agri-food businesses, to support strategic, long-term investment in a postbrexit environment.
Loans of up to €500,000 unsecured, with favourable terms for up to 10 years to support capital investment, will be offered. Ms Humphreys said: “Currently, the pillar banks will only lend for up to seven years.
“We will be passing the legislation required and launching the scheme in early January next year.” Agriculture Minister Michael Creed said €120m of the €300m will be available as an agri-food package. “However, unlike previous similar schemes, this can be reviewed and adjusted according to demand. “This will be a long-awaited source of finance for young and new entrant farmers, especially the cohort who do not have high levels of security. “It will also serve smaller-scale farmers, who often do not have the leverage to negotiate for more favourable terms with their banking institution.”
However, the farming organisations have been critical of the Future Growth Loan Scheme because it is not available for working capital.