STRATEGIC BANKING CORPORATION OF IRELAND
Supporting SMEs with Sustainable Credit
ISIF
Irish Strategic
Investment Fund
EIB
The European
Investment Bank
@IrlDeptFinance
#SMECredit
KfW
Kreditanstalt für
Wiederaufbau
OTHER POTENTIAL
FUNDERS
STRATEGIC BANKING
CORPORATION
OF IRELAND
CURRENT RETAIL
BANKS IN IRELAND
NEW ENTRANTS INTO THE
IRISH SME LENDING MARKET
INDIVIDUAL
SMEs
WHAT WILL THE SBCI DO FOR YOUR SME?
• Provide loans of longer duration
• More suitable terms & conditions
• Potentially lower cost of funding
• Promotes greater competition
STRATEGIC BANKING CORPORATION OF IRELAND
Supporting SMEs with Sustainable Credit
NPRF/ISIF
Strategic Banking Corporation of Ireland
The Irish Strategic Investment Fund (ISIF) aims to invest in growth
enhancing projects within the Irish economy rather than investing
funds outside of Ireland. It is envisaged that the ISIF will
contribute around 30% to the SBCI’s funds. It will also provide
€10m of equity capital.
Initially, the Strategic Banking Corporation of Ireland (SBCI) will
source funds externally and lend them to SMEs through innovative
loans via other institutions called on-lenders. On-lenders can be
retail banks or other organisations that have the ability to assess
SMEs’ loan proposals. The SBCI will provide loans that are
currently not typically offered in Ireland. The SBCI will have a lower
cost of funding and this cost benefit must be passed onto SMEs.
EIB
The European Investment Bank (EIB) is the European Union’s bank.
A key priority of the EIB is to provide financing to small businesses.
It generally finances between 30% and 50% of a project.
KfW
Kreditanstalt für Wiederaufbau (KfW) is Germany’s state
development bank. It uses its state ownership to acquire funds on
the market at a lower cost. It then lends the funds onto banks in
Germany who in turn lend to SMEs. KfW’s involvement with the
SBCI stems from An Taoiseach’s interaction with Chancellor
Merkel.
Other Potential Funders
Preliminary contact has been made with other European state
development banks in line with the European Commission’s official
policy of cross border co-operation in this area.
Current Retail Banks in Ireland
Existing banks will borrow from the SBCI and lend to SMEs. The
Banks will assess the risk of SMEs’ borrowing proposals and the
banks will hold that risk. They must demonstrate without a doubt,
that the lower cost of sourcing funds from the SBCI is passed onto
SMEs, in order to avoid a serious breach of European Union state
aid regulations.
New Entrant into Irish SME Lending Market
The SBCI will lower barriers to entry for new entrants. Such new
entrants into the Irish SME lending market will be potentially
funded by the SBCI. This will drive competition and innovation.
New entrants could be existing international banks, insurance
companies and pension funds as well as new Irish lending
institutions.
@IrlDeptFinance
#SMECredit
Potential Beneficiaries
SME 1
An established SME that wants to borrow to facilitate upfront
expenditure on new machinery. It needs to match loan
repayments on that capital investment with the future extra
revenue or productivity savings from that investment. SME 1 could
benefit from a SBCI funded loan whose key feature is an extended
repayment holiday. This improves SME 1’s financial sustainability
as its cash flow risk has been reduced.
SME 2
SME 2 is a new start up that would be financially more sustainable
if it could pay back a loan to finance capital investment over a
longer period than is available to SMEs at present. Its current bank
wants the capital repayment to be paid back over three years but a
loan funded through the SBCI could be paid back over 6 years.