A State company set up to provide finance to small businesses has been threatened with legal action for allegedly acting in an anti-competitive manner.

The Strategic Banking Corporation of Ireland (SBCI) was set up under the auspices of the National Treasury Management Agency with €1.24bn of State backed funds to lend to growing businesses.

However, the SBCI has been threatened with legal action from Celtic Invoice Discounting which also provides finance to small firms. The SBCI has rejected the claims.

Independent TD Michael Lowry raised questions in the Dáil about SBCI and said there was "unease about the transparency of the scheme."

He added there were views that the "conditions for eligibility to the fund are structured to suit big established players in the market."

He said the "existing terms, conditions and format is anti-competitive and having a negative, adverse, detrimental impact on those lenders who cannot meet the unrealistic and unattainable criteria of the scheme."

SBCI has lent €45m to Bibby Financial, a UK company, at low interest rates.

Bibby Financial is a direct competitor to Celtic Invoice Discounting, which has to borrow at higher rates. 

Celtic Invoice Discounting has complained that smaller providers of finance have difficultly accessing funding from the SBCI.

Celtic says firms are required to set aside €10m in equity before the SBCI will provide them with funds.

Celtic’s director Peter Kerrigan said in a letter to the SBCI last month that "We are in direct competition with Bibby Financial Services as a result of State aid awarded to our competitor; the market will be dominated by Bibby in an unfair and anti competitive manner."

Mr Kerrigan added: "Now we are facing huge financial losses if we are to continue losing business to Bibby, who have secured a dominant position as a result of this State aid."

However, a spokesperson for the SBCI defended its requirements prior to providing finance.

He said "The SBCI's requirements are designed to mitigate risks to Irish taxpayers and European funding and to SME borrowers."

He said the requirement were in place to ensure companies had "necessary financial strength".
A spokesperson said it was "untrue" to suggest smaller suppliers of finance are excluded from accessing SBCI funding.

He added Irish companies which have accessed SBCI funding include Merrion Fleet, Fexco, Finance Ireland and First Citizen Finance.
 
In the Dáil today Taoiseach Leo Varadkar he would raise the issues highlighted by Mr Lowry with Minister for Finance Paschal Donohoe.

He added that it would be appropriate for the SBCI to come before the Finance Committee to discuss the issues.