It was just a chance conversation. I was telling someone that I had just been turned down by my bank for a loan,” said John.
“And they said: ‘I know where you can get a loan. At your Local Enterprise Office,’” John said. “At first I thought he was joking. However, he explained that Microfinance Ireland was offering loans to businesses like mine, which had difficulty getting bank finance. I had moved from sucklers to dairy earlier this year and I had invested in the milking parlour and facilities. I was not able to buy all the dairy cows I needed. It was like I was working at half the capacity, so it was worth a call. They were very helpful and they came out to go through the process. The man walked the farm and explained about the loan. He said he didn’t see any reason I wouldn’t get it as the extra cows would give me more repayment capacity. He helped me fill out the form and within two weeks I was approved for a loan of €15,000 that I have to pay back over three years. The interest rate is 7.85% and they did not charge fees and didn’t look for security.”
I was interested in John’s story. I had heard of Microfinance Ireland and I knew some farm diversification businesses that had got a loan from them, but this was the first time I had heard of a farmer using them. Michael Johnston, chief executive Microfinance Ireland, told me they have given loans to a small number of full-time farmers, but have strong ambitions to increase the level of activity to the sector.
Microfinance Ireland (MFI), a not-for-profit lender, was established to deliver the Government’s Microenterprise Loan Fund. It was initiated by the Government to provide another funding avenue to assist people who are finding it difficult to access credit, which, in turn, will help to create and sustain employment.
MFI recognises that some businesses may have difficulty in accessing credit from banks – due to economic difficulties or for reasons such as lack of security, current level of bank debt, difficulty with existing borrowings, or lack of a track record. One area Michael specifically mentioned they want to develop is where young farmers are taking over or developing the farm and they are finding it difficult to obtain all the finance they need.
“We have no problem co-funding with the bank up to the limits that we can,” he said.
MFI gives unsecured loans from €2,000 up to €25,000. Farmers can get up to €15,000, but farm diversification businesses can get up to €25,000. Terms of repayment vary from three to five years. The interest rate is set at 8.8% but you can get a discount of 1%, dropping it to 7.7%, if you apply though the Local Enterprise Office.
The business has to have less than 10 employees and be below €2m in turnover, so most farmers will qualify.
Loans may be used to fund the start-up of a business, the purchase of stock, equipment, machinery and business vehicles, and are also available to established enterprises.
How to apply
“People can contact their Local Enterprise Office (LEO) and there is also an online application that you fill out, but we will also look for other information,” said Paul Kerr, external loan assessor for Microfinance Ireland.
“We would need a basic cashflow and short business plan. We focus more on the person than the banks would,” said Paul.
If you did have problems with existing debts, you need to tell MFI about these, along with the arrangements you have made with the relevant financial institution. It will require evidence of this. If you can demonstrate that you are dealing with your current debts and your business has the capacity to repay a new loan, then MFI is willing to consider your application.
“We would accept about 50% of loan applications but, in most cases, the issue for refusal is we cannot see how the repayments would be made,” said Paul.
“You don’t have to be refused by the bank, but we have to see that you would likely not be given the money. Saying that, we have given loans to business which have got part of the money they needed from the bank,” he added.
Loans are generally for three years. Up to five years may be considered if it involves financing of capital expenditure for equipment, machinery, or vehicles, for example. This will be agreed to on an individual basis. They do not charge any arrangement or set-up fees and do not impose early redemption penalties for businesses wishing to pay off their loans early.
Loans are unsecured. However, when a sole trader or partnership borrows money, they will be personally liable for the loan. When MFI lends to a limited liability company, it will require the directors and/or shareholders to provide it with a personal indemnity for the amount borrowed, which is similar to the sole trader being personally responsible for the repayment of the loan.
MFI has €10m a year to lend and so far this year have given out €5m to €5m. So, like in John’s case, it could be worth to call MFI if you are having difficulty getting credit.
Contact your Local Enterprise Office or visit www.microfinanceireland.ie
What makes a good application?
According to www.microfinanceireland.ie, some of the factors that make a good application are:
A clear business plan and knowledge of the business from previous experience or skills of the employees.Good understanding of the business.Clear details of the financials of the business, including sales revenues, overhead and loan repayment costs, broken down on a monthly basis.If the applicant has existing personal or business debts, they have arrangements in place to repay these debts and are able to demonstrate through bank statements that the repayments are being made.The purpose of the loan being sought is not to rescue the business in the short term, or to repay creditors, revenue or other business debts.A loan assessor will ultimately seek to be satisfied that the business has evidence of strong sales prospects and will be able to make the loan repayments, as well as covering all the overhead costs of the business.
A successful applicant will generally have clearly outlined and covered all the relevant areas in their business plan and other supporting documentation.
* Microfinance Ireland benefits from a guarantee issued under the European Progress Microfinance Facility (EMPF)established by the European Union.
* The EPMF is a microfinance initiative established in March 2010 with €200m in funding from the European Commission and the European Investment Bank.
Sum-up:
• Microfinance Ireland is an option for farmers to borrow money.
• It is targeted at businesses that are having difficulty getting credit.
• Farmers can borrow up to €15,000 while farm diversification and other businesses can borrow up to €25,000.
• Repayments are over three to five years and no security is needed.
• Interest rates are 7.8% to 8.8%.
It was just a chance conversation. I was telling someone that I had just been turned down by my bank for a loan,” said John.
“And they said: ‘I know where you can get a loan. At your Local Enterprise Office,’” John said. “At first I thought he was joking. However, he explained that Microfinance Ireland was offering loans to businesses like mine, which had difficulty getting bank finance. I had moved from sucklers to dairy earlier this year and I had invested in the milking parlour and facilities. I was not able to buy all the dairy cows I needed. It was like I was working at half the capacity, so it was worth a call. They were very helpful and they came out to go through the process. The man walked the farm and explained about the loan. He said he didn’t see any reason I wouldn’t get it as the extra cows would give me more repayment capacity. He helped me fill out the form and within two weeks I was approved for a loan of €15,000 that I have to pay back over three years. The interest rate is 7.85% and they did not charge fees and didn’t look for security.”
I was interested in John’s story. I had heard of Microfinance Ireland and I knew some farm diversification businesses that had got a loan from them, but this was the first time I had heard of a farmer using them. Michael Johnston, chief executive Microfinance Ireland, told me they have given loans to a small number of full-time farmers, but have strong ambitions to increase the level of activity to the sector.
Microfinance Ireland (MFI), a not-for-profit lender, was established to deliver the Government’s Microenterprise Loan Fund. It was initiated by the Government to provide another funding avenue to assist people who are finding it difficult to access credit, which, in turn, will help to create and sustain employment.
MFI recognises that some businesses may have difficulty in accessing credit from banks – due to economic difficulties or for reasons such as lack of security, current level of bank debt, difficulty with existing borrowings, or lack of a track record. One area Michael specifically mentioned they want to develop is where young farmers are taking over or developing the farm and they are finding it difficult to obtain all the finance they need.
“We have no problem co-funding with the bank up to the limits that we can,” he said.
MFI gives unsecured loans from €2,000 up to €25,000. Farmers can get up to €15,000, but farm diversification businesses can get up to €25,000. Terms of repayment vary from three to five years. The interest rate is set at 8.8% but you can get a discount of 1%, dropping it to 7.7%, if you apply though the Local Enterprise Office.
The business has to have less than 10 employees and be below €2m in turnover, so most farmers will qualify.
Loans may be used to fund the start-up of a business, the purchase of stock, equipment, machinery and business vehicles, and are also available to established enterprises.
How to apply
“People can contact their Local Enterprise Office (LEO) and there is also an online application that you fill out, but we will also look for other information,” said Paul Kerr, external loan assessor for Microfinance Ireland.
“We would need a basic cashflow and short business plan. We focus more on the person than the banks would,” said Paul.
If you did have problems with existing debts, you need to tell MFI about these, along with the arrangements you have made with the relevant financial institution. It will require evidence of this. If you can demonstrate that you are dealing with your current debts and your business has the capacity to repay a new loan, then MFI is willing to consider your application.
“We would accept about 50% of loan applications but, in most cases, the issue for refusal is we cannot see how the repayments would be made,” said Paul.
“You don’t have to be refused by the bank, but we have to see that you would likely not be given the money. Saying that, we have given loans to business which have got part of the money they needed from the bank,” he added.
Loans are generally for three years. Up to five years may be considered if it involves financing of capital expenditure for equipment, machinery, or vehicles, for example. This will be agreed to on an individual basis. They do not charge any arrangement or set-up fees and do not impose early redemption penalties for businesses wishing to pay off their loans early.
Loans are unsecured. However, when a sole trader or partnership borrows money, they will be personally liable for the loan. When MFI lends to a limited liability company, it will require the directors and/or shareholders to provide it with a personal indemnity for the amount borrowed, which is similar to the sole trader being personally responsible for the repayment of the loan.
MFI has €10m a year to lend and so far this year have given out €5m to €5m. So, like in John’s case, it could be worth to call MFI if you are having difficulty getting credit.
Contact your Local Enterprise Office or visit www.microfinanceireland.ie
What makes a good application?
According to www.microfinanceireland.ie, some of the factors that make a good application are:
A clear business plan and knowledge of the business from previous experience or skills of the employees.Good understanding of the business.Clear details of the financials of the business, including sales revenues, overhead and loan repayment costs, broken down on a monthly basis.If the applicant has existing personal or business debts, they have arrangements in place to repay these debts and are able to demonstrate through bank statements that the repayments are being made.The purpose of the loan being sought is not to rescue the business in the short term, or to repay creditors, revenue or other business debts.A loan assessor will ultimately seek to be satisfied that the business has evidence of strong sales prospects and will be able to make the loan repayments, as well as covering all the overhead costs of the business.
A successful applicant will generally have clearly outlined and covered all the relevant areas in their business plan and other supporting documentation.
* Microfinance Ireland benefits from a guarantee issued under the European Progress Microfinance Facility (EMPF)established by the European Union.
* The EPMF is a microfinance initiative established in March 2010 with €200m in funding from the European Commission and the European Investment Bank.
Sum-up:
• Microfinance Ireland is an option for farmers to borrow money.
• It is targeted at businesses that are having difficulty getting credit.
• Farmers can borrow up to €15,000 while farm diversification and other businesses can borrow up to €25,000.
• Repayments are over three to five years and no security is needed.
• Interest rates are 7.8% to 8.8%.
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