Loan guarantee scheme for small firms planned

Detailed work is underway on a Government-backed loan guarantee scheme for viable small businesses, the Minister for Enterprise, Trade and Innovation, Batt O'Keeffe, TD, told the Small Firms' Association's annual conference in Dublin last week. Mr O'Keeffe said it would be important that any scheme "complements rather than substitutes" the main banks' lending commitments under the recapitalisation package. He said detailed discussions on how the plan can be achieved are underway and are hoped to be finalised very shortly, the minister added. The scheme would target market failure in small business lending when commercially viable businesses fail to get credit because of insufficient collateral and information deficits despite having demonstrated an ability to repay. Over 2,000 loan guarantee schemes operate in almost 100 countries. "Ireland is one of the few nations in European Union that does not have some form of loan guarantee scheme," said Mr O'Keeffe. "Getting credit flowing to small businesses is vital to our economic recovery." Government TD for Meath, Johnny Brady, said it was good news for Meath businesses. "In recent times I have heard stories from local business-owners who are struggling to survive but lacking the credit to do so. Giving practical support to local business helps to safeguard local jobs and the local economy," he said. "It is hoped that the details of the loan guarantee scheme will be finalised shortly and I look forward to seeing the positive effects," added Deputy Brady. Meanwhile, the Association of Chartered Certified Accountants (ACCA) added its welcome to the announcement of the Government-backed loan guarantee scheme for viable small businesses. Liz Hughes, head of ACCA Ireland, said: "The biggest single issue that small business in Ireland faces today is a lack of access to credit. We welcome the announcement by Minister O'Keeffe that the Government will introduce a guarantee scheme for loans for small businesses. The initiative will save jobs and businesses. We have noted the inclusion of the word 'viable' in the minister's speech and would ask that the scheme be simple and easy to apply for, without the need for complex business plans or auditor certificates, as small business simply can not afford to pay for these." ACCA is also offering some tips for keeping a business up and running if a bank has withdrawn or reduced the business overdraft or lending facility. Aidan Clifford, ACCA's advisory services manager, said: "Engage with the bank, communicate with them regularly, provide them with trading updates, explain and be honest. Banks will react better to open and honest communication rather than providing a drip feed of bad news, but if your credit is withdrawn there are still some options." The 10 tips to save your business where credit has been refused are: • Appeal the lending refusal to the Credit Review Office. • Transfer your whole banking facilities to another bank. • Negotiate a net wages overdraft account, if necessary with a different bank. • Open a new bank account in a different bank and lodge all sales to the new bank account. • Consider approaching your local credit union, they have different lending criteria but they may be only able to offer small personal loans. • If you have to make redundancies, consider a fixed borrowing facility repayable when the 60 per cent Government refund of the redundancy payment is received. • Keep your PAYE and PRSI payments up to date because in the event of a liquidation, a director will not get credit for PAYE or PRSI deducted from their wages but not paid over to Revenue. • Liquidation is always an option and, if you acted honestly and responsibly, you could be back in business and creating new jobs very soon. • Consider some mitigation strategies such as transferring half the marital home to your spouse if you have not done so already. • Work with your accountant to plan a path through the financial difficulties, but contact them early. Mr Clifford added: "Moving banks is a drastic option and the new bank is unlikely to extend any credit to a business that simply walked away from an overdraft in another bank. However, if the issue is a one-off bad debt and the business is trading reasonably well, moving bank may be your only option."