€300m EIB bank fund to be available to smaller firms

A €300 MILLION fund from the European Investment Bank (EIB) is to be made available in loans to small and medium-sized Irish businesses from early next month.

The fund will be distributed through AIB, Ulster Bank and Bank of Ireland to companies with projects which meet the EIB criteria.

The EIB was established to finance business projects that further the objectives of the EU. Member states act as shareholders.

The funds will be disbursed below current business lending rates, although it was unclear last night what rate the EIB would charge and also at what rates the three banks would lend to small and medium-sized enterprises (SMEs).

Plutarchos Sakellaris, EIB vice-president responsible for lending activities in Ireland, said: “Ensuring access to finance for small businesses is essential for the Irish economy and it is a crucial element of the EIB’s newly adopted measures to help Europe through the current financial and economic crisis.”

He said providing lending to SMEs was of critical importance to the general European economy and to smaller economies such as Ireland in particular.

Minister for Finance Brian Lenihan welcomed the “significant lending facility” provided by the EIB, describing it as a “positive signal of the joint capacity of Europe and Ireland working together to meet the credit needs of the enterprise sector”.

Patricia Callan, director of the Small Firms Association, said businesses were being squeezed from a number of angles due to restricted access to finance and reduced consumer spending. The fund would assist small firms to meet these challenges and prevent business closures and job loses.

The Irish Small and Medium Enterprises Association (Isme) said companies were finding it “extremely difficult to access bank finance”.

In a statement, AIB said it would be offering loans from its €100 million portion of the fund at rates lower than its existing business lending facility of 4.64 per cent. It would start to make the EIB funds available from April 9th.

Bank of Ireland said the EIB scheme was targeting SMEs seeking loans of between €50,000 and €300,000 on a short- or medium-term basis.

As part of the Government’s recapitalisation of AIB and Bank of Ireland, both banks have committed to increase lending to small firms by 10 per cent this year. This lending will be subject to demand from “viable” enterprises. Under the plan the Government is to inject €3.5 billion into each bank.