Loan fund proposed to help support growth
A new fund to tackle property debt and save struggling companies is needed in Northern Ireland, according to a top banker speaking at a Belfast conference.
Kevin Kingston, deputy chief executive and managing director of business banking at event sponsor Danske Bank, said a new mezzanine loan fund would support business growth.
It would free trading cashflows that are being channelled into servicing property debt, he told the Chartered Accountants Ulster Society Funding for Recovery 2014 conference in Belfast.
He said that with Northern Ireland particularly badly exposed to bad debt from the property crash, a fund similar to Invest NI's Growth Loan Fund would help businesses brought down by debt.
Mr Kingston said that according to InterTradeIreland's Access To Finance Report, almost 30% of local medium-sized SMEs bought property in recent years using bank debt, which is now putting major pressure on cashflow and holding back growth.
He added that the Economic Advisory Group's Access to Finance report found businesses with property overhang were four times more likely to have sought additional bank finance but were also more likely to have struggled in accessing the finance they need.
Mr Kingston proposed that a solution to the problem could come in the way of a bespoke fund based on the mezzanine finance model used by the Growth Loan Fund in Northern Ireland.
"The Growth Loan Fund has worked very well to date, with 60 commercial loans worth £18m approved in the past 18 months to fund local business growth. A similar approach could be used to re-finance residual property debt where it is holding back the growth of good local trading businesses," he said. "A bespoke mezzanine fund would enable such companies to take a longer-term approach to repaying and reducing legacy property debt."
A number of firms in Northern Ireland have fallen into administration partly due to property debts, including building firm Patton and utilities firm KPL.