Less than a tenth of the money set aside for a special State loan scheme to help businesses prepare for Brexit has been sanctioned, sparking concerns about the level of readiness.
Almost €29 million of the Government’s €300 million Brexit loan scheme has been authorised at bank level on 132 loans, almost 14 months after the financial support was announced.
The low take-up has led to fears that businesses are not willing to commit to fresh borrowing when they do not know what to prepare for in light of the political uncertainty in Britain.
The Department of Business, Enterprise and Innovation said that the scheme had received 620 applications and 563 had been approved by the State-owned Strategic Banking Corporation of Ireland.
There have, however, only been 132 loans sanctioned by the lenders involved in the scheme – Bank of Ireland, AIB and Ulster Bank – up to the middle of this month.
Tánaiste Simon Coveney warned last week that businesses needed "to be wide awake to Brexit" after he advised the Government to continue making preparations for a potential no-deal exit in light of the political turmoil in the UK and divisions over the manner and timing of Britain's departure
Theresa May’s resignation as British prime minister last week, leaving open the possibility of a Brexiteer taking over, has increased concerns that the UK may leave the EU next October without a deal.
Loans of up to €1.5 million are available under the scheme at a maximum interest rate of 4 per cent. The Government hopes businesses will use the loans to prepare for Brexit.
The scheme, which makes loans on terms ranging from one year to three, also offers unsecured loans of up to €500,000.
New deadline
The department said that it expected applications to increase as the UK’s new deadline to leave the EU on October 31st drew closer.
“It is worth bearing in mind that any application for finance has to be in line with a company’s financial planning,” said a spokesman for the department.
“At present firms are naturally reluctant to take on debt until the details of the Brexit challenge becomes clearer.”
The Government strongly urged businesses to make an application for a loan “if they suspect they might need one down the line”.
“Ultimately, they do not have to draw it down unless they need it, but it is good contingency planning to prepare for the worst,” said the department’s spokesman.
Fianna Fáil’s spokeswoman on Brexit Lisa Chambers TD said she understood why so few businesses were applying for the loan given that the application process was “quite cumbersome” and small and medium-sized firms were finding it difficult to justify expenditure “to prepare for the unknown”.
“What they are looking for is a stronger level of support from Government, probably more in the line of a grant to help them stay afloat.”
Last month the Government opened another €300 million lending programme, the longer-term Future Growth Loan Scheme, offering businesses loans of up to €300 million ranging from eight to 10 years to small and mid-sized businesses to help them prepare for post-Brexit planning.
