Deep Blue Publications Group: Struggling businesses can avail of half-priced loans from German bank
SMALL companies will now acquire funding from Germany at 50%
the interest rate charged in Ireland under a program certified by Chancellor
Angela Merkel.
The German Chancellor has told her state investment bank to
coordinate closely with Irish officials to enhance loans for the economy, to
include availability to funds for small and medium businesses.
But funds may also be provided for investment, for construction and for
bigger companies.
The development is designed to allow Irish businesses
seeking capital at a lower interest rate than the one provided by Irish banks.
At present, the average interest rate applicable for a small
Irish business is approximately 4.5pc – over 100% more than the rate for a
similar business in Germany, where loans are provided at merely 2pc.
SUPPORT
The plan to provide further loans at lower rates is likewise
seen to motivate more businesses to invest.
“The need for loans depends on the affordability. There will
be higher demand for funding if we can reduce the rate,” a Government official
said.
The arrangement came as a result of negotiations between
Taoiseach Enda Kenny and Chancellor Merkel regarding steps to aid the economy.
The German development bank, KFW, will determine possible
steps to provide the loans.
The funds come at a lower rate because KFW is a triple-A
rated bank; hence, it can acquire money at a lower rate and pass on the benefit
to its clients.
The credit will be channeled through the National Treasury
Management Agency and the new Strategic Investment Fund or the state-operated
banks, AIB and Permanent TSB.
The Taoiseach said Ms. Merkel personally promised to
coordinate hand-in-hand with Ireland to enhance funding processes.
In a report, Ms. Merkel said the German development bank
will work with the Irish officials “rapidly, so as to fulfil its goals on this
program as quickly as possible”.
After the announcement, the Irish Bankers Federation (IBF)
released a report pointing to a marked decrease in lending to companies in the
first part of this year; but banks insist this is a result of companies being
reluctant to take out loans.
IBF director Felix O’Regan stated that any improvement in
credit availability should be encouraged.
However, he said financiers operating here are suffering due
to falling demand.
Driving business activity, by encouraging consumer spending,
is the best means for achieving that, Mr O’Regan said.
Bank of Ireland head of small business, Gerry Prizeman,
stated that firms are wary of fresh loans.
Business owners only took out half of the €3.6bn of funds
the bank had intended to provide in 2012, for instance. Those who have availed
are presently utilizing below 40pc of the cash accessible on their overdrafts.
