Wednesday, 3 June 2020

Questions (419)

Michael McGrath

Question:

419. Deputy Michael McGrath asked the Minister for Business, Enterprise and Innovation the reason capital and interest is payable under the new €2 billion credit guarantee scheme from the start in view of the fact that the UK scheme allows for a window of 12 months for interest and capital repayments; and if she will make a statement on the matter. [8286/20]

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Written answers (Question to Business)

Since the Covid-19 crisis began, Government has worked to put in place a suite of supports to ensure appropriate financing is available to businesses that have been impacted by the outbreak or by the restrictions that have been put in place to mitigate the spread of the disease.

The Government on 2 May announced a new €2 billion COVID-19 Credit Guarantee Scheme as a further development of the existing Credit Guarantee Scheme (CGS) 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 can 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 implementation of this Scheme will require primary legislation, the drafting of which has been approved by Government, and my officials are working with the Office of the Parliamentary Counsel on this drafting.

There are significant advantages to operating loan guarantee schemes through participating financial providers. This allows the Government to leverage existing commercial lending infrastructure to provide an efficient mechanism for making competitive lending products available to Covid-19-impacted businesses. The guarantee structure ensures that eligible applicants to the schemes represent a reduced risk to the participating lender, which in turn ensures access to appropriate financing for more businesses.

However, the operation of these loan schemes through the financial providers also means that interest is a feature of the loans, as some interest must be charged by the lenders to cover overheads and capital costs if they are to continue to work with Government. The new Covid-19 Credit Guarantee Scheme will however, have interest rates below current market rates.

My officials are currently working through the operational aspects of the Covid-19 Credit Guarantee Scheme with various stakeholders and this includes the details of the loans which will be covered by the Scheme. I assure the Deputy that I continue to work with my colleagues across Government to examine necessary supports to assist businesses impacted by Covid-19.