Back in business as banks free up billions

There was good news for businesses yesterday when it was announced that Bank of Scotland Ireland has said it will lend €1 billion to consumers and businesses in 2009.

Announcing details of the new lending initiative, the bank said that it has seen unprecedented demand for lending over recent months, as the credit crunch bites.

The €1 billion will be made up of €900m in loans, and €100m in venture capital funding. The bank may take a small stake in the firms it lends to.

Last week the bank announced details of a €100m initiative aimed at the first time buyer mortgage market. That money is part of the €1 billion fund.

Today it said a further €100m would be made immediately available to support the hotel industry, which has been hard hit by the slowdown in the Irish and global economies.

Today's fund is substantially bigger than the €250m fund announced on Monday by Bank of Ireland. And there may be more money to come, as both banks say they are in advanced discussions with the European Investment Bank to access its €30 billion fund for small business to strengthen support for the sector.

The chief executive of Bank of Scotland Ireland, Mark Duffy, said that in recent weeks customers had been contacting the bank in unprecedented numbers complaining about the lack of credit in the economy.

He said the loans given from the fund announced today will enable many small companies to stay in business. The funds will be allocated in the next four to five months to both existing and new customers.

The bank says it will make further announcements about where the money will be targeted over the coming period.

Jim Curran of ISME said the move was a step in the right direction and other banks should take similar action to help businesses.

A collapse in the once-thriving property market and global market turmoil made Ireland the first euro zone country this year to slide into recession, ending more than a decade of economic boom, while the credit crisis has hit funding availability.

Bank of Scotland (Ireland ) said it had already launched two separate funds of €100 million each as part of the €1 billion in lending. The two funds would provide support to the hotel industry and offer credit to first-time home buyers.

'It is our intention to launch a series of working capital initiatives in the form of loans, supports and venture capital to business customers and value for money schemes for personal customers over the coming months,' Duffy said.

The HBOS unit added it was in advanced discussions with the European Investment Bank (EIB ) to source additional money for Irish businesses.

The EIB plans to make €30 billion in capital available to small and medium-sized businesses (SMEs ) in the European Union, to help ease access to credit while lending conditions are tight.

Bank of Ireland, the country's second-largest bank by market capitalisation, said on Monday it was in advanced talks with the EIB over securing funds for SMEs. It also launched a €250 million fund aimed at providing support to businesses.

 

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