Dáil Éireann Debate, Thursday - 22 April 2021
1. Deputy Denis Naughten asked the Tánaiste and Minister for Enterprise, Trade and Employment if low interest loans will be made available through SBCI and Microfinance Ireland directly to the tourism and hospitality sector to assist them with reinvestment as part of a Covid-19 recovery strategy; and if he will make a statement on the matter. [21034/21]
Amharc ar fhreagraMy Department has introduced a range of business supports in response to the COVID-19 pandemic including loan guarantee facilities for businesses of different sizes.
The COVID-19 Credit Guarantee Scheme makes up to €2 billion in lending available to businesses that have been negatively impacted by the pandemic. As a result of the high level of the State guarantee, loans are being provided at interest rates lower than the current market rate for similar loans. Interest rates can vary across lenders and also vary depending on the size and term of the loan. The latest data available in respect of interest rates charged on drawn loans shows that 96% of loans drawn under the scheme have been provided at interest rates of between 2.5% and 2.99%. These are significantly reduced rates on commercial loans rates of the same term and size.
While these loans are predominantly being used for working capital purposes (58%), they are also being used for reinvestment purposes such as purchase of equipment and premises fit-out (26%). To date (8 April), €36m of lending under the scheme has been to businesses in accommodation and food services.
Loans available under the COVID-19 Working Capital Scheme range from €25,000 to €1.5 million and are for terms of up to three years. Loans are offered at favourable terms, including a maximum interest rate of 4% with no security on loans of up to €500,000.
Microfinance Ireland provides vital support to microenterprises by filling the lending gap in the market by lending to business that cannot obtain loans from other commercial lenders. It lends to business that do not meet the conventional risk criteria applied by commercial lenders and applies interest rate charges for its lending which are not reflective of its credit risk. Subsidised rates of interest have been applied in respect of the COVID-19 Business Loan and Brexit Business Loan with an interest rate of 4.5% available to all micro-enterprises where the application is made through the Local Enterprise Network or referred by a bank or Local Development Committees. The new rate for direct applications to MFI is reduced to 5.5%.
In July of 2020, the Future Growth Loan Scheme was expanded by €500m. This scheme offers state guaranteed loans to businesses seeking to make long-term investments. It has seen strong uptake since its expansion and this is an indication that businesses are planning and making investment for a post-COVID-19 environment. As of the most recent quarterly report (to end December 2020), businesses in the accommodation and food service sector account for approximately €21.68m of the lending drawn under the scheme.
I would strongly encourage businesses to avail of the low-cost lending facilities provided under the COVID-19 Credit Guarantee Scheme as they look towards reopening. This scheme is available until 31 December 2021 and supports both investment and liquidity needs for businesses affected by the outbreak of COVID-19 in Ireland and is available through a range of lenders including commercial banks, certain credit unions and non-bank lenders.
