Allister Raises Concern Surrounding Interest Rate for Small Business Loans
06 December 2011
TUV Leader Jim Allister has expressed concern that after the hype on the launch of the Programme for Government about a £50m loan fund for small business, the interest rates attached to the loans may be such as to nullify the benefit of the scheme.
"As is clear from a recent Assembly answer by DETI very high interest will be charged, because risk will be the driving force. Thus, small businesses getting a raw deal from the banks may find they do no better under this scheme, which rather defeats its purpose."
Question:
To ask the Minister of Enterprise, Trade and Investment how the interest to be charged on the loans scheme for small and medium sized enterprises, proposed in the draft Programme for Government, will be calculated.
Answer:
The loan fund will be managed on a commercial basis by an externally appointed fund manager.
The terms of each loan will be negotiated on an individual basis by the fund manager, taking account of relevant factors, including risk.
As loans will be primarily provided on an unsecured basis and other sources of funding will have been exhausted, the risk of default will be higher than on a secured bank debt portfolio. The fund manager will assess the risk involved in each case and will negotiate terms taking account of the risk level. The level of risk involved will necessitate an interest rate in excess of that charged by a bank on a lower risk secured debt.
