Cabinet to discuss loans proposal

A proposal which would see the State guarantee funds loaned by banks to small businesses will come before the Cabinet sub-committee on economic renewal in the next couple of weeks.

Tánaiste Mary Coughlan said the Department of Enterprise, Trade and Employment is examining the feasibility of implementing a state-guaranteed funding scheme for small and medium-sized enterprises.

A spokesman for the Minister said that the Department is looking at Fogape, a credit guarantee scheme currently in place in Chile, as a potential model for the system.

Approximately 20 countries across Europe have similar state-guarantee systems in place.

The spokesman could not confirm whether all financial institutions operating in Ireland, or only those covered by the Government guarantee, would be included in the proposed scheme, as the details of the scheme were still being worked out.

He said that only feasible businesses who were in need of working capital would be eligible for the scheme.

The announcement of the initiative was broadly welcomed by groups representing the SME sector.

David Fitzsimons, Chief Executive of Retail Excellence Ireland, an industry body which represents some 600 retail companies in Ireland, said that such an initiative would generate a "very positive" response from retailers.

"This could well be the boost they need in order to get them back on their feet. Credit continues to be tight but a Government decision to underwrite funds could make sure that working capital gets to businesses that need it."

Fine Gael Deputy Spokesman on Finance Kieran O'Donnell said that the Minister's announcement of a possible loan guarantee scheme indicates a realisation on the part of the Government that Nama "will not work."

"The Tánaiste's plans are an admission that Nama will not get credit flowing again to small businesses...small businesses are still being starved of credit, in spite of the billions of taxpayers' money poured into the banks and the creation of Nama."