The Credit Guarantee Scheme was implemented in 2012 and is available to Covid-19 impacted businesses, it supports loans up to €1 million for periods of up to 7 years. The Scheme offers a partial Government guarantee of 80% to banks against losses on qualifying loans to eligible SMEs. The scheme is designed to support a range of debt products appropriate to the borrowing needs of SMEs. Term loans and other products such as stocking facilities, performance bonds are covered by the Scheme.
The interest rate charged on a loan is the SME lending rate of the individual bank offering the loan which can change according to market conditions. It is possible for SMEs to avail of between a three to six-month interest-only payment period subject to the lender’s assessment of the application.
In addition, the borrower pays a premium which partially covers the cost of providing the guarantee. The premium can vary but is currently 0.5%. State Aid rules for Government guarantees require that a premium be charged. The European Commission’s State Aid Temporary Framework, also sets guarantee premium requirements but makes no provision for a zero-value premium.
An application to access the Credit Guarantee Scheme can be made through one of the participating finance providers which are currently Allied Irish Banks, Bank of Ireland and Ulster Bank Ireland. The Scheme is operated by SBCI, the Department plays no role in the application or decision-making process, which, is fully delegated to the participating lenders. The Credit Guarantee Scheme facilitates guarantees up to a maximum of €150 million in any one year.
As announced on Saturday 2 May, Government has agreed 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 be able to be used for 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. The implementation of this Scheme will require primary legislation, the drafting of which has been approved by Government, and my officials are already working with the Office of the Parliamentary counsel on this drafting work.