"Access to Finance” – an initiative Northern Ireland can bank on?

04 October 2017

Author: Claire McCloskey
Practice Area: Banking & Finance

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The “Access to Finance” initiative, a publicly-funded programme created by Invest NI, hit the headlines this week on the basis of a report issued by the Northern Ireland Audit Office (“NIAO”), which questioned the value for money afforded to the taxpayer in relation to some of the investment schemes, described as “high risk”.

Is this a fair criticism? Or is it possible that the risk attached to the initiative’s investment schemes is actually equivalent to the risk formerly assumed by banks and private investors when lending to Small and Medium Enterprises (“SMEs”)?

Access to Finance was established to bridge the gap created by those banks and private investors who became reluctant to lend to SMEs following the global economic crisis. The initiative was created by Invest NI in 2009 with the intention of improving the flow of credit to business in the context of a considerable contraction in commercial lending.

Six funds were created under the initiative, namely:

  • NI Small Business Loan Fund managed by NI Small Business Loan Fund - a £5 million revolving loan fund for individuals, private companies and social enterprises in the SME and micro enterprise size range in Northern Ireland;
  • Co-Fund NI II (ERDF) managed by Clarendon Fund Managers - a £50 million fund for SMEs in Northern Ireland;
  • techstart NI (ERDF) managed by Pentech Ventures LLP - a £29 million collection of funds for start-up and early stage businesses in Northern Ireland;
  • Growth Loan Fund managed by Whiterock Capital Partners - a £50 million loan fund for SMEs in Northern Ireland that can demonstrate either sales and profitability growth or strong growth potential; and
  • Development Funds (ERDF) managed by (1) Kernel Capital and (2) Crescent Capital - two venture capital funds, Crescent III and Bank of Ireland Kernel Capital Growth Fund (NI) have been designed to help SMEs in Northern Ireland accelerate their growth.

The NIAO report acknowledges that, whilst the Access to Finance strategy “is providing an important source of finance to local SMEs”, Invest NI “should also more clearly define what the overall strategy is expected to deliver” (Kieran Donnelly, comptroller and auditor general of the NIAO).

Invest NI has commented that it “welcome[s] the report and the NIAO’s recognition that our Access to Strategy is providing an important source of finance to SMEs”.

The duration of Access to Finance strategy is fifteen years and the six funds will continue to operate until 2024. The NIAO’s mid-term report gives pause for thought however it is probably “too early to estimate value for money” – as a spokesman for Invest NI asserted on its behalf – and measures of the initiative’s success may be difficult to establish in the short term.

For more information about the Access to Finance strategy, please visit: https://www.investni.com/support-for-business/funding-through-loans-and-equity.html.

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