Imelda Munster (Louth, Sinn Fein)
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480. To ask the Minister for Jobs, Enterprise and Innovation the loan schemes available to SMEs that allow them to borrow at 0% interest rates; and if she will make a statement on the matter. [8144/20]

Heather Humphreys (Cavan-Monaghan, Fine Gael)
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The loan schemes that have been put in place by my Department have been designed to achieve the widest reach with Exchequer funding in as fast a time as possible as one part of a suite of support measures for businesses impacted by COVID 19. Loan guarantee structures are a very effective response to the liquidity crisis, in particular where it is feasible to access counter-guarantees through the European Investment Bank [EIB].

There are significant advantages to operating loan guarantee schemes through participating financial providers. This allows the Government to leverage existing commercial lending infrastructure to provide an efficient mechanism for making competitive lending products available to Covid-19-impacted businesses. The guarantee structure ensures that eligible applicants to the schemes represents a reduced risk to the participating lender, which in turn ensures access to appropriate financing for more businesses.

However, the operation of these loan schemes through the financial providers also means that interest is a feature of the loans, as some interest must be charged by the lenders to cover overheads and capital costs if they are to continue to work with Government.

That said, the interest rates on the MFI Covid-19 loan scheme have been reduced from the interest rates of 6.8-7.8% typically offered by the MFI to a lower rate of 4.5-5.5%. The interest rate of 4% under the Covid-19 Working Capital Scheme represents a savings when compared with other similar lending available in the market, while the availability of loans of under €500,000 unsecured ensures that the scheme is more accessible to businesses.

Across the EU, different member states have prioritised different features of their respective liquidity supports to businesses, and so a direct comparison may not be appropriate. However, from the data available, Ireland’s loan guarantee schemes appear to be in line with many countries: they cover 80% of the loan value, at commercial or slightly lower rates.