SMEs need to look beyond banks for credit - NTMA chief

Availability of credit is still a key issue for many small businesses, but companies need to begin looking beyond the banks if they want to grow, according to John Corrigan, the chief executive of the National Treasury Management Agency (NTMA).

Speaking at the Small Firms Association (SFA) annual conference in Dublin on Tuesday, Mr Corrigan told delegates that a big cultural shift was required by companies who rarely consider going beyond the banks when seeking finance.

“Credit is not the answer. The answer is to look at equity participation as a fundamental building block in the financial structure of small and medium-sized enterprises (SMEs), “ he said.

Separately, the Minister for Small Business John Perry told delegates that the establishment of the Strategic Banking Corporation of Ireland (SBCI) will increase opportunities for investment and was "a timely addition to the credit landscape".

Mr Perry said the new lending fund, details of which were revealed last week, would provide over €500million of additional credit for smaller firms.

"SMEs will now be able to access loans of greater duration, with enhanced terms and potentially at a lower cost facilitated by the SBCI and its partners," he said.

In his speech to delegates, the SFA chairman AJ Noonan said small businesses were starved of working capital and long-term finance. He said that recent Government interventions such as the Microfinance loan fund and the seed capital scheme have failed.

Mr Noonan said the SME Credit Guarantee Scheme was "designed in a way to make sure and certain that it's not used." He added that the Microfinance Loan Fund "should be working but is not".

While welcoming the SBCI, Mr Noonan expressed concern that it too would fail to be of use to SMEs.

“The fund is welcome, but if it does not drill down to smaller projects it will be a failure and a game-changing opportunity will be missed,” he said.

Although some delegates openly expressed concern about access to finance, many were optimistic about the state of the economy and the potential opportunities for their businesses.

According to a poll taken at the conference, 66 per cent of delegates said their business was growing, with as many as 92 per cent expecting an increased performance over the next five years.

Two-thirds of delegates also said they intended to invest in their business over the next 24 months with brand development, additional staff and IT, cited as the areas in which companies would most like to invest.