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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640. To ask the Minister for Jobs, Enterprise and Innovation the average interest rate charged by the banks on the loans handed out with regard the current credit guarantee scheme; if there is a 0.5% premium on top of that for the guarantee scheme; if she is considering to reduce this premium to zero; and if she will make a statement on the matter. [6814/20]

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.

The interest rate charged on a loan is the SME lending rate of the individual bank offering the loan which can change according to market conditions. 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.

In addition, the borrower pays a premium which partially covers the cost of providing the guarantee. The premium can vary but is currently 0.5%.  State Aid rules for Government guarantees require that a premium be charged.The European Commission’s State Aid Temporary Framework, also sets guarantee premium requirements but makes no provision for a zero-value premium.

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.

As announced on Saturday 2 May, 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.  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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641. To ask the Minister for Jobs, Enterprise and Innovation the interest rate that will be applicable to loans advanced under the new scheme for the €2 billion credit guarantee scheme announced in early May 2020; and if she will make a statement on the matter. [6815/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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As announced on Saturday 2 May, 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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642. To ask the Minister for Jobs, Enterprise and Innovation the changes made to the credit guarantee scheme as a result of Covid-19; the number of loans that have been advanced under the scheme since the changes were made; the value of loans advanced under the scheme since the changes were made; and if she will make a statement on the matter. [6816/20]

Photo of Heather HumphreysHeather Humphreys (Cavan-Monaghan, Fine Gael)
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The Government announced 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, on the 2nd May. 

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 and as it awaiting legislation, loans are not yet being advanced under the revised scheme.

There are a number of liquidity supports for COVID 19 impacted businesses available right now, 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.

An application to access the current Credit Guarantee Scheme can be made through one of the participating finance providers which are currently Allied Irish Bank, 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.

When the COVID-19 crisis began, I made changes to the Credit Guarantee Scheme to make it easier for businesses to access – including removing the requirement that businesses be refused a loan by the banks before they could access 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.

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