Cheaper money is on the way for small businesses that are struggling for cash
Government-backed lender Microfinance Ireland has cut its interest rates.
A STATE-BACKED ORGANISATION looking to loan money to small businesses that are struggling for finance has just cut its lending rate.
Microfinance Ireland (MFI), a government funded not-for-profit lender to micro-enterprises, specialises in providing loans of between €2,000 and €25,000 to firms with fewer than 10 employees.
The body today announced it will cut its lending rate by 1% for all new arrangements from 1 July.
The rate will fall from 8.8% APR to 7.8%, while businesses that apply through their Local Enterprise Office can get a further reduced price of 6.8%.
Lending rates
This new rate is still slightly above the average paid by Irish companies for small business loans, which stands at about 6% - an already high rate in comparison to other EU countries.
MFI’s new chief executive Garrett Stokes said: ”We lend to micro enterprises that tend to find it difficult to borrow from traditional channels but we are able to apply a broader risk appetite to our lending and not only are we a fixed rate lender but our lending is unsecured.”
MFI also announced that it has launched a support programme to offer expert mentoring assistance to approved loan applicants.
It said that this will be arranged through the Local Enterprise Offices and “tailored to the specific requirements of the business”.
Stokes said that the interest rate cut “will mean that our business loans are more affordable”.
He added that the new mentoring programme will “greatly increase chances of commercial success and helping to sustain jobs in the longer term”.
Microfinance activity
So far, MFI has approved nearly 900 loans. Just over €11 million has been drawn down, which the government says has helped to support over 2,000 jobs.
Jobs Minister Mary Mitchell O’Connor recently said that she is aiming to secure an additional €25 million in funding to help keep MFI afloat.
In a written Dáil response to Fianna Fáil’s Niall Collins, she said that the lender has given a “very satisfactory performance in a difficult market niche at a very difficult time”.
“To secure the future development of MFI my officials are in negotiations regarding securing a tranche of €10 million additional exchequer funding required to keep the fund operating as a going concern beyond 2017 in line with company law requirements,” she said.
She added that this would be supplemented with an additional €15 million in bank funding.
This post was updated to include additional quotes Microfinance Ireland.
