Business advice from Dublin

There is an excerpt below from a recent speech by John Perry TD, minister for small business in the Irish government.

The government has recently introduced some financial measures to enable SMEs to access finance.

Measures too late?

Observers will say that these measures are too late, as many small businesses have ceased to trade as they were starved of working capital by their banks. I will keep an open mind, and will encourage clients to access these schemes based on how they might meet their financial requirements.

The banks have changed their tune

The banks have changed their tune with SMEs*, and resisted lending to this market for the last 4 years. Now they are engaging in a “love-in” with the Irish SME sector. All are luring owner managers with heavy advertising via many channels including social media campaigns, promising that finance is now available. [These are the same banks who caused the loss of the Irish state’s economic sovereignty. They are kept afloat through the funding of massive bailouts by tax payers. More on this another day]

John Perry starts “Small businesses are a central part of the economy and their ability to succeed and grow underpins our future potential for jobs, growth and prosperity. 98.5% of all firms are small and employ over 650,000 people throughout the country.

As Minister for Small Business, we in Government acknowledge that small businesses are currently operating in a particularly difficult environment. It is important therefore, that we continue to focus on delivering on a practical programme of actions that can achieve positive improvements in the operating environment for small businesses.

This Government is acutely aware of the importance of the SME sector and its potential for generating employment. Our challenge has been, and continues to be, where to best target our efforts and financial supports and interventions to optimum effect, so as to assist the sector.

In particular, access to credit facilities has been the major issue for small businesses. The initiatives taken by the Government to restructure and re-capitalise the banking system was the principal initial response to making credit available.

The Action Plan for Jobs 2012 (see is particularly focussed on assisting the small business sector to cope with the current economic crisis and to prepare businesses for future growth and job creation.

Through the Action Plan for Jobs, we have, in particular, delivered in 2012 a number of measures to ensure that businesses do not face unnecessary obstacles as they attempt to expand and create the jobs, we so badly need. These include:

The Microfinance Ireland initiative was launched on 27th September, 2012 and lending commenced on 1st October 2012.

This Government initiative is designed to stimulate lending to sustainable micro-enterprises and is targeted at start-up, newly established or growing micro enterprises across all industry sectors, employing not more than 10 people.

It will provide loans of up to €25,000 for commercially viable proposals that do not meet the conventional risk criteria applied by commercial banks.

The Credit Guarantee Scheme is the second major project targeted at supporting an additional flow of credit for SME’s introduced by my Department this year.

The Credit Guarantee Scheme, which came into operation on 24th October, 2012, will be will be closely targeted at commercially viable, well performing enterprises that have a solid business plan and a defined market for their products or services which can demonstrate repayment capacity for the additional credit facilities but which cannot secure credit facilities due to market inefficiencies. Ulster Bank, AIB and Bank of Ireland are participating in the Guarantee Scheme.

The Guarantee Scheme will provide a 75% guarantee to banks against losses on qualifying loans to job-creating firms to get the banks’ lending again to industry and entrepreneurs. The minimum permissible loan value will be €10,000 and the maximum will be €1,000,000.”

Such schemes are useful and will meet the needs of some SMEs. But they should not be open ended – banks should fulfil this role of financing business in a free market economy.

Reliance kills enterprise and innovation

And these and all the other plethora of state funded enterprise supports should not infect the “disease” of reliance on government support  – & it’s related illness dependency – in SMEs .

In the long run such reliance kills enterprise and innovation.

Billy Linehan, Celtar business consultants

* SME stands for small and medium sized enterprise. A common term for businesses with up to 250 employees. The majority of businesses in Ireland have less then 50 employees.