Dáil Éireann Debate, Tuesday - 6 October 2020
163. Deputy Francis Noel Duffy asked the Tánaiste and Minister for Enterprise, Trade and Employment the basic eligibility criteria for businesses to avail of the credit guarantee scheme; and if he will make a statement on the matter. [28724/20]
View answerAnnounced as part of the Government’s suite of supports for businesses that have been negatively impacted as a result of the outbreak of COVID-19 in Ireland, the COVID-19 Credit Guarantee Scheme will facilitate up to €2 billion in lending to eligible businesses.
The Scheme offers a partial Government guarantee (80%) to participating finance providers against losses on qualifying finance agreements to eligible SMEs, small Mid-Caps and primary producers. It is designed to incentivise participating finance providers to continue to play their role in supporting the availability of additional liquidity to Irish businesses.
The main features of the COVID-19 Credit Guarantee Scheme are:
- The amount available under the COVID-19 Credit Guarantee Scheme is €2 billion.
- A guarantee rate of 80% for the State with the lenders retaining 20% of the risk of the loan.
- Loans from €10,000 to €1,000,000 are available for terms of up to five and a half years.
- There will be no portfolio cap for individual lenders.
- Lenders will set the interest rate on the products offered, which will reflect the benefit of the State Guarantee. The discount on the interest rate will be transparent to borrowers and will be specified in the loan agreement.
- Loans under €250,000 are unsecured.
- A guarantee premium on each loan under the Scheme is required to be paid. The premium will range from 0.15% - 0.68% for SMEs, depending on the term of the loan, and from 0.3% - 1.55% for small Mid-Caps depending on the term of the loan.
- The scheme will be timebound and will be available initially until 31 December 2020.
The COVID-19 Credit Guarantee Scheme is currently available through AIB, Bank of Ireland and Ulster Bank. Further to the Open Call, other finance providers are currently being assessed by the operator of the Scheme, the Strategic Banking Corporation of Ireland, and my Department and will be coming online in a number of weeks.
The eligibility criteria for the COVID-19 Credit Guarantee Scheme includes:
- The borrower must be an SME, Primary Producer or a small Mid-Cap established in Ireland.
- In order to qualify for the Scheme, the borrower will have to declare an adverse impact of minimum 15% of actual or projected turnover or profit due to the impact of COVID-19.
- The borrower must declare that on the 31/12/19 it was a viable business and was not in financial difficulty. As an exception to the above, the Scheme is also available to micro or small enterprises which were already in difficulty on 31 December 2019 provided that they are not subject to collective insolvency procedures and that they have not received rescue aid or restructuring aid.
- The borrower must be able to demonstrate to the lender that it can return to viability in the future.
- Certain sectors are excluded from the scheme:
- Construction of buildings and construction of residential and non-residential buildings
- Real Estate Activities - buying and selling of own real estate
- Mining - extraction of crude petroleum, extraction of natural gas, support activities for petroleum and natural gas extraction
- Manufacturing - manufacture of tobacco products, manufacture of weapons and ammunition, manufacture of military fighting vehicles
- Financial and Insurance Activities - monetary intermediation
- Gambling and betting activities
The total amount of COVID-19 Credit Guarantee Scheme funding per participating enterprise shall not exceed:
- double the annual wage bill of the participating enterprise (including social charges as well as the cost of personnel working on the undertaking’s site but formally in the payroll of subcontractors) for 2019, or for the last year available. In the case of undertakings created on or after 1 January 2019, the maximum finance agreement must not exceed the estimated annual wage bill for the first two years in operation; or
- 25% of the participating enterprises’ total turnover in 2019.
The lender assesses whether the business will be able to make the necessary repayments on the credit, according to its normal assessment criteria and the decision of the lender in terms of assessing viability is final. There is no automatic entitlement to receive a guaranteed facility even if a business believes it satisfies the basic eligibility criteria. The normal redress processes are available to declined businesses. The Department plays no role in the application or decision-making process, which, is fully delegated to the participating lenders.
