Written answers

Wednesday, 20 May 2020

Department of Jobs, Enterprise and Innovation

Credit Guarantee Scheme

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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631. To ask the Minister for Jobs, Enterprise and Innovation the differences between the existing credit guarantee scheme and the new €2 billion credit guarantee scheme announced on 2 May 2020; and if she will make a statement on the matter. [6673/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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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 already working with the Office of the Parliamentary Counsel on this drafting work.

There are a number of liquidity supports for COVID 19 impacted businesses currently available, including the existing Credit Guarantee Scheme supporting loans up to €1 million for periods of up to 7 years.  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. 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.

The differences between the existing Credit Guarantee Scheme (CGS) and the new Covid-19 Credit Guarantee Scheme include:

- An increase in the level of guarantee available to participating finance providers from €150 million per annum to €2 billion and an increase in the portfolio cap which will provide these finance providers with greater security to offer facilities under the guarantee.

- The Covid-19 CGS will be available to primary producers which are excluded from the existing Scheme due to State Aid rules. This restriction has been removed in light of the Covid-19 situation and in accordance with the European Commission's State Aid Temporary Framework.

- The Covid-19 CGS will be available to small Mid-Caps (up to 499 employees) which are excluded from the current CGS. 

- The Scheme will have interest rates below current market rates. The exact figures cannot be announced until the legislation and operational aspects have moved further along the process.

My officials are also currently engaged in discussions with a view to broadening the number of participating finance providers participating in the Scheme.

I can assure the Deputy that I continue to work with my colleagues across Government to examine  supports to assist businesses impacted by Covid-19.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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632. To ask the Minister for Jobs, Enterprise and Innovation the date the current credit guarantee scheme came into effect; the allocation of State funding set aside for the existing credit guarantee scheme as against the scheme announced on 2 May 2020; the amount that has been currently used up; the number of loans that have been issued to companies under the scheme each month since the scheme was established; and if she will make a statement on the matter. [6674/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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The Credit Guarantee Scheme was implemented under the Credit Guarantee Act 2012, which came into effect on 30 August 2012, with secondary legislation setting out the operational detail of the Scheme.  The Credit Guarantee Scheme 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.

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 current Credit Guarantee Scheme facilitates guarantees up to a maximum of €150 million in any one year.

There are no upfront costs for the scheme, however loans under guarantee represent a contingent liability for the State.  Since its inception there have been eight claims against the Credit Guarantee Scheme for a value of €955,247.

Since its inception in 2012 there have been 863 loans sanctioned to the value of €151,659,224 up to 31st March 2020.  While the monthly breakdown is not available I have provided the annual breakdown as follows.

Year No. of Loans Sanctioned Value
2012 6 €582,000
2013 88 €12,107,500
2014 68 €9,283,444
2015 108 €20,385,050
2016 131 €22,312,000
2017 129 €19,726,700
2018 139 €21,561,562
2019 118 €25,067,734
2020 Qtr 1 76 €20,633,234 

As announced on Saturday, 2 May 2, 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.  It will also have interest rates below current market rates.  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.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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633. To ask the Minister for Jobs, Enterprise and Innovation the reason for the exclusions to the current credit guarantee scheme; if the agriculture sector primary production in agriculture, horticulture and fisheries is excluded from the scheme; if the construction sector property-related activities are excluded from the scheme; if a company cannot use the scheme to restructure its current debt; and if she will make a statement on the matter. [6675/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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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.

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.

Primary producers in agriculture, horticulture and fisheries are excluded from the current Credit Guarantee Scheme under State aid rules. However, they will be included under the Covid-19 Credit Guarantee Scheme arising from the amended State Aid rules under the the European Commission’s State Aid Temporary Framework measures to support the economy in the context of the Covid-19 outbreak. 

The new Scheme will be available to all SME sectors, and will also be available to small Mid-Caps (under 499 employees) which are excluded from the current Scheme. 

Refinancing of existing debts are excluded from the current Credit Guarantee Scheme as the purpose of this Scheme is to facilitate additional lending into the economy. Such arrangements continue to be dealt with by banks under their current lending arrangements.  The new Scheme will include re-financing arrangements, the terms of these arrangement are currently under discussion with the financial institutions. 

The implementation of the Covid-19 Credit Guarantee 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.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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634. To ask the Minister for Jobs, Enterprise and Innovation if the exclusions in the current credit guarantee scheme will be removed from the new scheme announced on 2 May 2020; if the new scheme will avail of the relaxed state aid rules; if state aid approval has been sought for the new scheme; and if she will make a statement on the matter. [6676/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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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.

As announced on Saturday, May 2, 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 in agriculture, horticulture and fisheries.  These sectors are excluded from the current Credit Guarantee Scheme under State aid rules. They will be included under the Covid-19 Credit Guarantee Scheme arising from the amended State Aid rules under the the European Commission’s State Aid Temporary Framework.  The Scheme will also be available to small Mid-Caps (up to 499 employees) which are also excluded from the current Scheme. 

The new Scheme will include re-financing arrangements, the terms of these arrangement are currently under discussion with the financial institutions. 

My officials are currently engaged with the European Commission in seeking approval for the Covid-19 Credit Guarantee Scheme and ensuring the Scheme's adherence to the rules set out in their Temporary Framework.   

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.

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