Post offices and credit unions could soon be offering state-backed business loans

IRELAND’S STATE-BACKED BUSINESS lender is looking to partner with An Post and credit unions to get finance into the hands of smaller enterprises.

Fora has learned the Strategic Banking Corporation of Ireland (SBCI) has been in talks with the organisations about acting as distribution networks for its SME loans.

One of the major lures of the proposed deal, which is still in the early stages of negotiation, would be to tap into the strong regional presence of both post offices and credit union branches.

As of late last year, there were 1,130 post offices and 339 active credit unions across the country.

A Department of Finance spokesman confirmed the SBCI was in separate, “preliminary discussions” with both An Post and credit unions about the possibility of using them to distribute SME loans.

Fora understands a deal could be done as early as this year, however An Post is also looking at alternative backers to get a business finance option off the ground.

The SBCI, which doesn’t lend directly to businesses, has already teamed up with six so-called ‘on-lenders’ – three banks and three non-bank lenders – to offer its €800 million funding pool to indigenous enterprises.

Most recently, it was announced that it had paired with car loan provider First Citizen Finance to provide €50 million in funding for agribusinesses.

However with all but €10 million of the SBCI’s funds already committed to the six lenders, it is not known how much money would be available to SMEs under the plan or if further funding would be sought.

The right product

An Post’s spokeswoman said the organisation was “discussing options with a number of potential finance partners in relation to the provision of loans to the SME market”.

“While we want to move forward with this quickly, it’s all about the right product with the right partner for the right price,” she said.

The organisation’s incoming chairman, Dermot Divilly, recently said that a “radical rethink” of its business model was needed in the face of declining mail volumes.

An Post delivered a slender operating profit for 2015 amid ongoing diversification into services such as banking and insurance. Last year it entered the lending market through its subsidiary, One Direct, when it began selling First Citizen Finance’s car loans.

Meanwhile, the Irish League of Credit Unions proposed in a recent discussion document setting up a central fund – backed by a state-guaranteed bond – for lending to SMEs. Its members would also act as “an efficient distribution network to originate loan applications”.

An SBCI spokesman said: “We are continuing to explore potential initiatives with a number of other partners to provide additional ways for SMEs to apply for SBCI loans and will announce further details in due course.”

The SBCI’s mandate is to provide SMEs with cheaper finance options as well as boosting competition against the dominant pillar banks. It was set up with European financing and money from the Irish Strategic Investment Fund (ISIF), which was assembled with what was remaining of the National Pension Reserve Fund.

Irish small- and medium-sized businesses pay the highest average interest rates of enterprises operating in any country within the EU with rates up to three times those in the cheapest territories.