Hitting the ground running (the SBCI’s first 100 days of lending)

By Nick Ashmore

It’s no coincidence that the launch of our first report into loans drawn down supported by the Strategic Banking Corporation of Ireland (SBCI) this week corresponds with an appointment to replace my worn car tyres.

Like any new business, since the launch of the SBCI we have been on the road getting the word out to a host of inspiring Irish business owners and their advisers about the funding we are making available through local lenders.

Our first report reflects the traction gained since early March, showing almost €45 million has been drawn down so far – a good outcome in the short time we’ve been operating and reflective of what we are hearing out there from SMEs – that they have a growing appetite for investing in their businesses and need flexible patient funding to continue to achieve their goals.

To take a step back, prior to SBCIs establishment, Ireland didn’t have a state run development bank or promotional financial institution focused on SMEs. In other European countries such institutions assisted Governments to maintain business funding during and following the crisis when bank credit was difficult to access.

In light of this, in late 2013, an agreement was made between An Taoiseach, Enda Kenny and German Chancellor, Angela Merkel to channel funds from German promotional bank KfW towards supporting Irish SMEs and set up such an institution.

Further funding was secured from the European Investment Bank and the Ireland Strategic Investment Fund culminating in an initial pool of €800 million. During 2014 the National Treasury Management Agency (NTMA) and the Department of Finance worked rapidly to get the SBCI up and running. In fact, Ireland achieved this faster than any other European country that was undertaking similar ventures to support their indigenous businesses following the financial crisis.

And so, the SBCI began lending at the start of March 2015 with a clear mission in mind of providing lower-cost, longer-term funding to Irish businesses. Initial funds of €400 million were divided between AIB and Bank of Ireland to on-lend to SMEs.

So far, the vast majority (€39 million / 1478 loans) of what SMEs have borrowed has been for investment purposes to support their growing businesses. To give some colour to this, we have heard from agricultural SMEs who have invested in new farming machinery and milk tanks; a dentist fitting out a new surgery; a food manufacturing company purchasing new premises and a leisure centre and an agri-equipment manufacturer both purchasing new equipment.

A much smaller group of 142 SMEs borrowed to gain working capital and a much smaller amount again – only six – were for refinancing exiting bank loans.

Although a broad array of sectors are represented in these results, the top three sectors accessing the loans were farmers (32%), administration & support services (16%) and accommodation & food service businesses (13%). The highest percentage of loans drawn were for South Western SMEs (19%), followed by the West and Dublin SMEs, who each borrowed 15%.

We’ve produced an infographic which displays the full set of results here.

The remainder of 2015 will see us continue our awareness campaign to ensure we maximise the opportunity for businesses to avail of lower-cost funding.  We also hope to be announcing new lenders very soon so stay tuned and follow us on Twitter @SBCIreland.

SMEs can apply for SBCI loans through AIB and Bank of Ireland and find further information on the SBCI website.