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SBCI LOANS

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Strategic Banking Corporation of Ireland

In March of this year, a new low-cost loan fund was announced by the SBCI. This new fund could see SMEs and the farming sector have greater ease of access to much-needed funds through some of the country’s major banks. As of late March, its board of six directors has been confirmed, taking this from a pipe dream to a very real and tangible option for the growth of smaller Irish businesses.

This fund will offer long-term working capital through major lending institutions. Its purpose is to offer SMEs and the farming sector more flexible products than are currently available to them. They will offer low-cost funding to financial institutions. The idea being that these savings will then be passed on to SMEs. AIB and Bank of Ireland have already signed up as partners.

So what is the SBCI?

The SBCI is the Strategic Banking Corporation of Ireland is a new bank launched in the last quarter of 2014. It is hoped that it will become the primary source of funding for SMEs in coming years with the Government hoping that over €5billion will be made available to SMEs in the future.
The initial funders for this new banking venture are the Ireland Strategic Investment Fund (ISIF), the European Investment Bank (EIB) and the KfW German promotional bank.
The SBCI is a strategic SME funding company with the primary goal of creating access to flexible funding for Irish SMEs. The SBCI aims to:

  • Provide flexible products with flexible repayment options.
  • Provide lower cost funding to major lending institutions to be passed on to SME’s and the farming sector.
  • Create real market competition for new entrants to the SME lending market.

AIB are currently offering customers looking for a new business loan of up to €30,000, an answer within 48hours. They are also offering loans at a 2% discount from their Standard Business Loan Rate. Funding of up to €5m for the growth and expansion of your business will be made available. Their terms will be between 2 and 10 years.

Is a loan with SBCI the right choice for your business?

These loans are open to most SMEs. This form of funding is open to your business providing it meets the following criteria:

  • The company must have a turnover of €43m or less.
  • The company must not be part of a wider group of businesses.
  • The company must have less than 250 employees.
  • The company must have a significant presence in Ireland.
  • The company must have less than 25% of their capital held by public bodies.
  • It is important to bear in mind that your chosen lending body will need to share your information with the SBCI

We would advise consulting with your local participating lending body in order to ascertain your company’s eligibility for this scheme. If you have any queries at all about this fund and how it could benefit your business, please don’t hesitate to contact us at DCA Accountants.

ULSTER BANK LOAN REFINANCING

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The final loan sale for the parent of Ulster Bank RBS (Royal Bank of Scotland) is due to be completed in September 2015. The final sale of the ‘Project Aran’ non-performing loan portfolio to Cerberus in December 2014 saw the disposal of the loan book relating to property borrowings. The focus has now shifted to the Small and Medium Enterprise (SME) lending book.

 

Following on from this, Ulster Bank have now agreed to allow borrowers apply to refinance existing debts through a third party bank. The hope is that all offers would be submitted by February 28th 2015 with full financing to be completed by March 31st 2015.

 

So what does this mean for you should you wish to pursue this option?

 

With such a tight timeline we would advise that all borrowers should be swift and thorough in compiling and submitting their documentation. Ensure ahead of time that all of your documentation is present and correct and that all points and requests are backed up with the valid paperwork. It might seem like an obvious request but even the smallest omission can cost you valuable time. With such a short period of submission, there is unlikely to be time allocated for re-submission.

 

Bank of Ireland are said to be gearing up to refinance a high volume of Small Business Loans from Ulster bank ahead of this portfolio sale, in a move similar to that which occurred with the Government Credit Guarantee scheme, which has been extended to cover business whose lenders are/were leaving the Irish Market. This scheme was originally only available to new loans but the decision was made to open it up for refinancing options with the move of Danske bank among others out of the country.

 

The issue for borrowers hoping to opt in to this refinancing offer of Ulster Banks is of course in the short timeframe allotted for submission so organisation is key and, as always DCA Accountants are here for you should you require assistance.

NEW MORTGAGE RULES

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The Central Bank’s much debated and often bemoaned stricter mortgage rules were finally officially announced last month and officially put into place only last week.

 

Under these new tighter guidelines first time buyers appear to have business as usual as they can continue to apply for a 90% mortgage up to a limit of  €220,000. Anything above this limit will be subjected to the new 20% deposit requirement. Given that the average house price in Dublin is approximately €269,000 (according to latest published results from myhome.ie) it would seem unlikely that many buyers will escape the clutches of this requirement entirely.

Those looking to trade up on their existing homes will be entirely subjected to the 20% requirement for the entire sum of their loan which has caused concerns that many young couples and families may find themselves ‘locked out’ of the property market or, having already taken a step onto the first rung of the property ladder in easier financial climates, may find it impossible to take the next step, or fall off completely.

 

There will also now be a cap on the amount that can be loaned, something that banks and mortgage lenders previously had left to their own discretion. This sees lenders being restricted to only borrowing 3.5 times their income. Given that there is massive disparity between wage scales across various sectors, this rule would seem to leave those in lower earning sectors out in the cold.

 

It was reported last week that banks have been urging mortgage defaulters to seek a familial ‘dig out’ to help them meet their mortgage repayments.  These new tightened mortgage rules could now see buyers returning to the ‘bank of Mum and Dad’ model of purchasing in order to meet the deposit demand. It was recently reported that the Credit Union will be willing to allow parents to borrow significant amounts to assist with their children’s deposit as the prospective buyer themselves would be unable to take out a loan.

 

As the Capital Acquisitions Tax on gifts currently allows an un-taxed amount up to €225,000 we may well expect to see these rules also tightened. As it stands, without the addition of a parental gift the average couple can expect to be saving for at least four years to meet their deposit requirements for first time buying, whilst those trading up may well be reliant on these so-called ‘dig outs’ when they have outgrown their current dwelling.