SMALL TO medium-size (SME) enterprises are the backbone of the European economy and companies should be aware of the EU funding opportunities open to them, a conference heard yesterday.

Representatives from the SME community gathered in Dublin for EU Finance Day, an event organised by the European Commission to inform businesses about the kinds of EU funding options available.

Attendees heard that €1.1 billion of EU money is available through the competitiveness and innovation framework programme (CIP), an EU scheme which has been running since 2007 and will continue until 2013. The EU believes that, through leveraging, this should generate €30 billion of new finance for the sector. This is a separate fund to the €300 million made available to Irish banks by the European Investment Bank in March this year.

However, Angelo Willie, a representative from the enterprise and industry directorate of the European Commission, said Europe does not provide any funding directly. Rather, the system is implemented by the European Investment Fund (EIF), which channels the funding through financial “intermediaries” – usually banks – in the member states. Small businesses then approach selected national financial institutions to get access to the funding.

As well as offering funding, the programme offers the financial institutions guarantees to encourage them to make more debt finance available to SMEs.

James McGing, head of the EIF section of the economic and financial affairs division at the European Commission said no Irish institution had yet received money under this programme. Irish institutions are making applications and his unit is processing them.

When contacted by The Irish Times, both Bank of Ireland and AIB said they were in the early stages of discussions with the EIF about the funds.

Patricia Callan, director of the Small Firms Association, said that, while any EU funding was welcome, banks must ensure that they secure the money that is available. “We need to have movement on this issue. Banks need to be accessing these funds.”

Irish Banking Federation chief executive Pat Farrell, who also spoke at yesterday’s conference, said Irish banks were fully committed to supporting viable businesses in these difficult times.

Banking on business: the reality of gaining access to finance

** JOHN FOLEY is managing director of eTEC Consulting Services, a management consultancy firm that offers business support services to a range of businesses across the SME sector. He believes access to finance is a major problem for companies. A number of his clients have had their overdraft facilities cancelled and converted to term loans, which they then cannot afford to pay.

"Most small businesses don't realise that their overdraft facility is conditional on their current account being in credit for 30 non-consecutive days over a 12-month period" he says. "Obviously because of the slowdown in cash flow and payments at the moment, a lot of small companies are finding themselves in breach of the terms and conditions." One of his customers was faced with a bill of €7,000 last year in bank charges. "During the boom, companies did not have to worry about cheques bouncing or payments not being met. In effect, they did not have to manage their money. But the banks are within their legal rights to impose charges. Really, both parties need to communicate more."

** NORMAN STEWART is director of Airtel, a Dublin-based company which provides telecommunications software to the aerospace industry.

The company employs 10 people and has an annual turnover of just over €1 million.

Although it does not require equity investment, its main issue is working capital. "We call it project financing. Much of our work is based around projects lasting from one to three years, so essentially we have a cash-flow problem.

"We need to gain finance to bridge the gaps between when we get paid by our customers."

He says the company's main worry is future access to money.

"We have a lot of work coming up and, as a result, our need for working capital is going to increase. At the moment we don't know where we stand.

"Our bank manager on the ground is supportive but is worried that head office won't sanction any more cash.

"I really don't know if we're going to get what we need – even though we're a viable, growing business."

** GERARD McLOUGHLIN works for Ballymun-Whitehall Area Partnership, a partnership organisation which works on behalf of start-up sole traders. His experience of securing funding from banks is broadly positive.

"There is a perception that banks are more interested in sustaining established businesses rather than embarking on more risky start-up ventures, but this is not always the case," he says.

Three months ago his organisation was involved with two young men in their early 20s from the local area, who had an internet gaming business idea. "The concept was to sell banner advertising space on gaming platforms," he says.

"Bank of Ireland in Finglas backed the plan, essentially providing start-up capital for the business.

"The company is now actively trading as Xeon gaming and doing extremely well. Our experience has been that if you have a high-calibre project, banks will engage."