John Perry (Sligo-North Leitrim, Fine Gael)

The design phase of a temporary partial credit guarantee scheme has been completed and formal proposals will be brought to Cabinet shortly. Once the design of the scheme is approved by the Government, there will then be a further request for tender published to select an operator to allow for the roll out of the scheme over the coming months. In parallel with the work taking place on the design of the scheme, the Department is preparing primary legislation to make the necessary statutory provision for such a scheme.

The scheme will provide a level of guarantee to banks against losses on qualifying loans to job-creating firms to get banks lending again to industry and entrepreneurs. The purpose of the scheme is to encourage additional lending to SMEs. It will be closely targeted at commercially viable, well performing companies that have a solid business plan and a defined market for their products or services, and can demonstrate repayment capacity for the additional credit facilities but which cannot secure credit facilities due to the following two market failures: insufficient collateral for the additional facilities; or expansionary SMEs which due to their sectors, markets or business model are perceived as higher risks under current credit risk evaluation practices.

The Government's commitment will be for an initial period of one year. Specific performance criteria will be set down to allow for review and revision of the scheme at the end of that initial period before any commitment to a roll-over of the scheme for subsequent years.

Refinancing of existing debts will not be eligible for guarantee and such arrangements will continue to be dealt with by banks under their current lending arrangements. However, in cases where new lending is sought along with refinancing, the availability of a guarantee in respect of the new lending element should be of assistance in providing an overall package of support to the business, including consolidation of existing debts.

The temporary partial credit guarantee scheme will complement the Government plans on the restructuring and recapitalisation of the banking system which seek to secure an adequate flow of credit into the economy to support economic recovery.

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