STRONG demand from small businesses for low cost funds has led to applications for more than the £208 million available under the Government's Access to Finance initiative. Because of this demand, the Small Firms Association has called on the Government to begin negotiations with the banks to set up another similar loan scheme.
Bank of Ireland is no longer taking loan applications from small businesses for loans under the initiative which offers funds for seven years at an annual interest rate of 6.5 per cent. The bank announced yesterday that it has received qualifying applications from about 650 companies for the full £89 million it has allocated to the fund.
Loan approval involving about £70 million has been issued to 503 companies and about £18 million has been drawn down by the companies. The projects being funded are expected to lead to the creation of at least 700 new jobs.
The four main banks are providing the funds under the initiative with Bank of Ireland providing £89 million, Allied Irish Banks £79 million, Ulster Bank £30 mil lion and National Irish Bank £10 million.
AIB said yesterday there had been "a sizeable" demand for the funds. However, a spokesman declined to quantify the amount that had been applied for. Alter a significant number of queries, about 250 formal applications with business plans had been processed by the branches and sent to headquarters, he said. So far, about £13 million had been drawn down for projects which would lead to a bout 1,000 new jobs, he said.
Despite a significant level of funding approved, he said some projects "may not come to fruition" leaving funds available for other companies. Under the scheme, all funds must be drawn down by the end of 1996.
Ulster Bank said it had enquiries for funds well in excess of the £30 million it has committed to the initiative, but added that not all the enquiries resulted in formal applications. Declining to reveal the amount of funds applied for and approved for competitive reasons, the spokesman said Ulster had committed funds to 129 companies.
"There has been substantial take up. There is not a hugh amount left, but we are still open for business," he commented.
National Irish Bank had qualifying applications for the full £10 million it has committed by the first week in December, a spokesman said. Applications are being processed and loans of about £7.5 million have been approved with about £3 million drawn down to date. The bank cannot take any new applications, he said, unless some of its existing applications drip out.
Under the Access to Finance initiative subsidised by the Government, the European Commission and the four main banks - small companies can apply for loans of £20,000 to £500,000 for a seven year term. There are no acceptance or negotiation fees. The initiative applies to most manufacturing food, tourism and services companies with up to 50 employees and an annual turnover of less than £3 million. Some 25 per cent of the £208 million must be allocated to tourism projects. Bank of Ireland said that just over 26 per cent of its fund has been allocated to tourism related projects.
Companies must submit a detailed business plan, including an outline of the purpose of the loan the initiative sets out specific purposes for which funds are available and details of the jobs which will be created. Service companies must provide an assessment of the impact of their proposals on competitors and the market.
Launched by the Department of Enterprise and Employment last August, the initiative is aimed at encouraging job creation, improving the viability of small businesses and increasing their ability to adapt to the EU single market.
Calling on the Government to begin negotiations with the banks on a new funding scheme, the SFA said yesterday that the strong demand for funds under the initiative confirmed that the greatest requirement of small firms is not grants but access to long term, low cost finance.
