Representatives from the German development bank KFW have met with Department of Finance officials to explore ways of how it will provide half-price loans to Irish SMEs, Taoiseach Enda Kenny has revealed.
Mr Kenny said he expects the German bank to offer Irish businesses much cheaper credit than what’s on offer from the banks here.
“So, for instance, you know, a small and medium enterprise that would look for a loan of €500,000 at Irish rates would be about 4.25%, at German rates that would be 2%,” said Mr Kenny.
He said the difference in rates would mean “jobs, the retention of jobs, and the creation of jobs” for Irish companies.
The move was originally signalled by Mr Kenny in the Dáil when he announced Ireland was opting for a clean exit from the EU/IMF bailout instead of seeking a financial backstop.
The plan, approved by German chancellor Angela Merkel, will help Irish businesses invest and expand, especially the one in four which say they cannot access credit.
KFW is a public bank and its official name, the Kreditanstalt für Wiederaufbau (Reconstruction Loan Corporation), gives a clue of how it was formed in the late 1940s under the Marshall Plan to help war-ravaged Germany in its reconstruction.
Because the bank is AAA rated, it can access credit at much cheaper rates that others and therefore provide the cheap loans.
The Taoiseach’s comments were welcomed by Irish Small and Medium Enterprises Association (ISME) chief executive Mark Fielding.
He pointed out that some small companies looking for five-year term loans were being charged up to 15%.
He said the main Irish banks had no experience of risk analysis and spoke of a precision engineering firm that was seeking a loan of €110,000 for a lathe. When he eventually contacted the relationship manager, he had no idea what a lathe was and told the loan applicant — “I’m very sorry, but we won’t be funding your latte this time.” Source: Irish Examiner.