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May, 2010

AIB General Manager Dennis O’Callaghan said at the weekend that banks had no doubt that they needed to support small businesses. At the launch of a €500 million scheme aimed at encouraging SMEs to re-engage with the financial institutions, O’Callaghan said they would be allowing customers to convert some of their borrowings to interest-only repayments for a two-year period. This, he said, would have significant benefits for business. “We’re taking a longer term view of businesses where there’s a clean line of sight to viability, but they’re caught for now and we need to support them,” he told the Sunday Business Post.
O’Callaghan said the Government’s decision to set up the Credit Review Office – an independent body which investigates cases of borrowers being denied credit – would facilitate greater trust between small businesses and their banks. He said 40 per cent of SMEs had no borrowing requirement, with 35 per cent servicing their borrowings according to their terms. This left 25 per cent of SMEs who had a problem. “Every one of them should feel they can engage with us,” O’Callaghan said.
The new lending commitment would be made available to under-pressure businesses once they could demonstrate they had a strong track record, financial capability based on what he termed “sensible” numbers and a credible business plan to navigate the current downturn. The bank would not single out specific sectors that would or would not qualify for the package – but O’Callaghan estimated that the offer would be open to almost 90 per cent of SMEs.
Meanwhile, AIB and Bank of Ireland have both admitted that some of their customers have already brought cases to the Credit Review Office. Enterprise Minister Batt O’Keeffe recently advised businesses to make all credit applications in writing to create an audit trail for possible appeals.
The Sunday Tribune said that banks are trying to “improve their business lending skills” as asset-based lending is no longer the norm.

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