Small Businesses Benefit From Interest Rate Cut

From 1 July 2016, Microfinance Ireland is offering a 1% cut in its interest rates on loans to small businesses.

Microfinance Ireland (MFI) was set up in 2012 as a not-for-profit lender designated to deliver the Government’s Microenterprise Loan Fund.

MFI provides “micro-enterprises” with access to loan finance of between €2,000 and €25,000. This can be a helpful option to businesses in getting finance.

What is a micro-enterprise?

A micro-enterprise is any business with less than 10 employees and an annual turnover of less than €2M.

MFI will consider applications from start-up as well as established businesses if they meet the criteria.

How can I apply?

Qualifying businesses can either apply directly to MFI, or indirectly through their Local Enterprise Office.

From July 1st applications made directly to MFI will get a standard rate of 7.8% APR, reduced from 8.8% APR. But applications made through the Local Enterprise Office can benefit from an even lower rate of 6.8% APR.

Should I use this option for my business?

It’s usually better to contact your own bank first when you’re looking for business finance. But an MFI loan would be worth considering if you are finding your own bank reluctant.

It’s worth noting that it’s no longer necessary to have been declined by your bank before you apply for finance from MFI.

What do MFI look for in an application?

MFI state that they will review each application on its own merits. But to be successful in an application – and these are good pointers for any finance application – they generally look for:

  • Evidence of strong sales prospects.
  • Ability to repay the loan (as well as paying all other business costs).
  • The owner to have experience in their sector with the personal qualities to make a success of the business.
  • A good business plan.

A good business plan would contain the following:

  • Details of the target market.
  • Knowledge of how business in that sector works. This coming from previous experience or the skills of employees.
  • Knowledge of the competition and how they price.
  • Financial projections broken down by month.
  • Details about other investment in the business, whether from the owner or other sources.
  • Copies of contracts already in place, or other evidence that sales will happen.

Applications can’t be used for a short-term rescue of an existing business, and the business must support at least one job and have the potential to create more jobs.

 

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