State-backed lender Microfinance Ireland has overhauled its loans to tackle low awareness

MICROFINANCE IRELAND (MFI) has rebranded its loan packages for small businesses to make its overall offering clearer to customers.

The government-backed lender, which specialises in loans to firms with fewer than 10 employees, has segmented its loan packages into four categories:

• Set-up loans for startups, €5,000-€25,000
• Cashflow support for existing businesses, €5,000-€25,000
• Business development loans for existing businesses, €5,000-€25,000
• Small loans for businesses with low funding requirements, €2,000-€25,000

Until now, the organisation has marketed a blanket offer of loans from €2,000 to €25,000 without explaining what exact options were available.

Chief executive Garrett Stokes said that the MFI largely relied on local enterprise offices to explain and tease out the different loan packages available.

He told Fora that he expects the rebranding exercise will “make our overall offering more user-friendly”.

“What we’ve tried to do with the packaging is be very precise so it becomes much clearer to (customers) as to what we’re offering, the terms of the offer and so that when they come online to us through their local enterprise office, they know exactly what they’re looking for.”

Awareness

In the most recent ‘bank watch survey’ by ISME, which represents small- and medium-sized businesses in Ireland, awareness of the government’s microfinance scheme was down with just over half of respondents saying they knew what it was.

Stokes said the clearer loan packages will boost awareness of the programme, which he described as a “huge advantage” to early-stage businesses.

Garrett Stokes (far right)

“The majority of our customers are people who cannot, for whatever reason, get lending from traditional lenders,” he said. “(MFI) enables somebody who has a good idea and wants to set up a businesses but can’t get the money themselves or funding from a bank to have another location to get help.”

He said that MFI’s criteria is “quite different from a bank” because all of its loans are unsecured.

“While banks have very definitely come back into the market, they still in general would find it difficult under their credit terms to actually lend to a startup if there is no security. That’s one of our key offerings.”

Lending rate

The MFI reduced its lending rate by 1% during the summer to 7.8% APR. Businesses that apply through their Local Enterprise Office can avail of a further reduced price of 6.8%.

According to Microfinance Ireland’s most recent progress report, the organisation has approved over 970 loans as of 30 June 2016, with over €14 million drawn down.

The government claimed that the lender has supported over 2,300 jobs since it was established in 2012 under the state’s ‘action plan for jobs’.

Stokes said MFI believes it is”due to receive another €10 million” in funding for 2017, but hasn’t received confirmation yet.