Des McCarthy
CEO, Microfinance Ireland
The COVID-19 pandemic brought to the fore the large number of supports that the Government provides for small business. As businesses grow, the demand for these services is expected to increase.
The latest credit demand survey indicates that the number of businesses experiencing an increase in turnover rose to 46% compared to 12% in the pandemic. Profitability of businesses has also improved with 57% of SMEs reporting profits compared to 31% for the COVID period comparable survey.
Post pandemic business recovery
Not surprisingly, Modified Domestic Demand (MDD), which is seen as the best measure of domestic economic activity, grew by 1½% in the third quarter of 2021. As a result, it now exceeds the level immediately preceding the pandemic (2019-Q4) by 3%.
The Government support eco system for small businesses includes Enterprise Ireland, the 31 Local Enterprise Offices and Microfinance Ireland (MFI) among others. Each of these entities supports small businesses in different ways. Together, they provide the full spectrum of business funding mechanisms from grants to equity to loans.
In this environment, MFI expect that there will be strong demand for loan products to fund start up and business expansion.
Alternative sources of funding
In this environment, MFI expect that there will be strong demand for loan products to fund start up and business expansion. As a government supported entity, we are able to provide loans to higher risk businesses that the conventional banks cannot service.
Our loan products are simple, flexible and affordable, plus the application process is straight forward. We provide unsecured, term loans of up to €25,000 repayable over a 3-5 year period to businesses with fewer than 10 employees and turnover of up to €2 million. We speak directly to each applicant to ensure that we can make the best case for their business proposal.
We have recently received the InBusiness Recognition Award for Finance Provider to Micro Business and Start Ups 2021, which is recognition of our support to small businesses.
Greater access to funding
In 2021, we agreed a new €30 million liquidity facility from SBCI that allowed the interest rate on all new MFI loans to be reduced to 5.5% APR and gives us the capacity to significantly increase our lending in 2022.
We also work closely with the Local Enterprise Offices (LEO’s) and loan applications submitted through the LEO receive a discounted interest rate of 4.5%. The LEO’s also deliver free mentoring to our clients if they feel it will increase the chance of business success.