Credit Options

Credit Options

Banks and non-banks provide a range of credit options for businesses to finance new assets.

Credit Options

Banks and non-banks provide a range of credit options for businesses to finance new assets and other business investments.  The main types of business credit for investment are outlined below.

Banks must follow a code set out by the Central Bank of Ireland in relation to lending called the Code of Conduct for Business Lending to Small and Medium Enterprises (SME Code).  The Code addresses a range of issues related to bank lending including applying for credit, declining or withdrawing credit, dealing with financial difficulties, handling compliants and providing information to customers.  The Code was recently updated by the Central Bank with additional provisions regarding small businesses in financial difficulties.  This revised Code will take effect from January 2012.

Please visit the Central Bank’s website here to see the current and revised Codes.

For a listing of credit intermediaries, including non-bank providers of asset finance authorised by the National Consumer Agency (NCA), please visit the NCA’s website here.

For more information on managing your credit and dealing with your bank, as well as information on agri or social finance, please click here.

The Government launched the Credit Guarantee Scheme and Microenterprise Loan Fund in 2012 to facilitate greater access to credit for SMEs.  For more information, please click here.

Medium-term Finance

Term Loan
A term loan is usually associated with the purchase of a major asset such as a motor vehicle or plant and machinery or with business expansion, although businesses can also use term loans for a range of other purposes.

Leasing - Finance Lease
For businesses that cannot afford to buy a business asset, such as a motor vehicle or machinery, leasing may be an attractive option. This enables the business (the lessee) to lease or rent the asset from a financial institution (the lessor) in return for regular payments over a fixed period of time. The lessor retains ownership of the leased asset.

Leasing - Contract Hire/Operating Lease
This is similar to a finance lease agreement, except that the lessor is usually responsible for maintenance and servicing of the leased asset.

Hire Purchase
The business makes regular payments to a lender in return for use of the asset, as with leasing.  When all repayments have been made, you then become the owner of the asset. Ownership of the asset only transfers to you when the last payment has been made, but you will have full use of the asset from the beginning of the agreement.

Long-term Finance

Fixed Asset Loan
A Fixed Asset Loan enables a business to purchase plant or machinery and pay for them over the period of their useful life. Repayments can be made over ten years.

Business/Commercial Mortgage
This provides long-term finance to assist in the purchase of new premises, the refinancing of an existing property or the purchase of an investment property.

Sale and Leaseback Agreement
The business may reach an agreement with a financial institution under which the firm sells property, plant or machinery to the institution, and takes out a long-term lease on the asset sold by the institution. This gives the business access to more cash but reduces the security in the business.