Once you have supplied all the information requested by the bank to process your loan application, you should get a decision within 15 working days. If your application has been successful, you will receive legally binding documents. You should study these carefully and take advice on them before you sign. If you are providing security in the form of assets, you need to be very clear on the impact on you and/or your guarantors in the event you cannot meet the terms set down by the bank.
In the event that your application for finance is refused, you should ask why and get this explanation in writing. It is possible that you may be offered a different lending product or mix of products than you asked for. For example, you might have requested €25,000 term loan and get offered a lower amount of a loan but offered leasing for financing equipment purchases instead. Talk directly with your bank to understand the impact of this on you legally and financially before you sign any binding contract. Make sure you understand exactly what interest and charges apply and compare this to the original request, rework your cash flows and get independent advice.
You can appeal the decision by the bank with the Credit Review office. Simultaneously, you may apply for Microfinance. The Government announced their microfinance scheme to support small and medium enterprises in October. To apply for Microfinance, you must:
- Have a commercially viable business proposal that has been refused credit by a bank;
- Employ less than ten people and have a turnover less than €2 million;
- Need less than €25,000.
The scheme is being administered through the County & City Enterprise Boards (CEBs) as part of the services offered to small business.
The steps involved are:
- Apply and be refused lending by a bank. Note what bank, who you dealt with, why you were refused and if you were offered alternative financing options;
- Call your local CEB and make an appointment to see an advisor. Provide copies of your bank application and all correspondence in advance of the meeting. You will be asked to complete the Microfinance application form in advance of the meeting (see link below).
- Attend your advisory session at the CEB and discuss your business plan in detail. You may need a second meeting or to facilitate a site visit to your premises if you have an existing business. The CEB will make a recommendation and forward all documentation to Microfinance Ireland who make the decision to lend or not. They will link directly with you regarding the decision and all necessary follow up.
- If you are refused finance or are unhappy with the offer from Microfinance, you may also appeal the decision with the Credit Review Office.
One cautionary note is that the interest rate charged on finance by Microfinance Ireland can be up to 9.5 per cent. This is higher than the current business rates offered by the banks. You need to consider whether this is something you can live with initially in order to establish your business banking credentials or not.