Dáil Éireann Debate, Wednesday - 20 May 2020
546. Deputy Robert Troy asked the Minister for Business, Enterprise and Innovation the likely interest rates foreseen under the €2 billion Covid-19 credit guarantee scheme as announced on 2 May 2020 (details supplied); and if the scheme is availing of new EU state aid flexibilities. [5674/20]
View answerThe Government on 2 May announced a new €2 billion COVID-19 Credit Guarantee Scheme as a further development of the existing Credit Guarantee Scheme already available from AIB, BOI and Ulster Bank.
This Scheme forms a major component of the government’s strategy to aid SMEs in these difficult times by providing critical support to ensure businesses are facilitated in having access to credit facilities to assist a return to a more regular trading environment.
It will provide an 80% guarantee on lending to SMEs until the end of this year, for terms between 3 months and 6 years. The guarantee will support a wide range of lending products between €10,000 and €1 million that have a maximum term of 6 years or less.
The Scheme will be available to all SME sectors, including primary producers and to Mid-Caps employing up to 500 staff. It will have interest rates below current market rates. The implementation of this Scheme will require legislation, the drafting of which has commenced.
It will also require approval from the European Commission under the ‘Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak’. My officials are working closely with DG Competition to ensure that this approval can be secured in a timely fashion.
The Government is supporting the provision of access to liquidity at lower than market rates. There is limited scope as some interest must be charged by the banks to cover overheads and capital costs if they are to continue to work with Government. However, I have asked my officials to continue to look into the question of interest rates and see if there is a way to achieve interest rate reductions.
There are strong advantages to loan schemes that run through the banks –
- There is a wide reach across the country.
- They encourage businesses to continue their existing relationships with their banks.
- Banks understand the financial issues faced by customers during this crisis and can work through problems with them – in addition the banks have announced that they may be able to offer payment holiday or emergency working capital facilities.
Finally, loan schemes allow the Government to leverage Exchequer funding to increase the volume of funding available, thereby providing much-needed support to more businesses.
These loans are one part of the suite of initial supports for Covid-19 affected businesses, which also includes the wage subsidy scheme, grants, waiver of commercial rates, warehousing of tax liabIlities as well as advisory & mentoring supports.
