Thursday, 15 October 2020
Department of Trade, Enterprise and Employment
Covid-19 Pandemic Supports
38. To ask the Minister for Trade, Enterprise and Employment if the credit guarantee scheme can be used for the refinancing of current term commercial loans; and if he will make a statement on the matter. [29997/20]
Government was pleased to launch the new €2 billion COVID-19 Credit Guarantee Scheme on the 7th September, the biggest ever state-backed loan guarantee in Ireland. The past few months have been extremely difficult for Irish businesses. We have seen our small and medium enterprises work hard to adapt and to continue trading in the face of this profound disruption.
This Scheme aims to provide supports for businesses that have been negatively impacted as a result of the outbreak of COVID-19. It provides critical support to ensure businesses are facilitated in having access to credit facilities to assist in their trading needs. It is available to SMEs, small Mid-Caps and primary producers.
The Scheme provides an 80% State guarantee on lending until the end of this year, for terms between 3 months and five and a half years and offers a range of lending products between €10,000 and €1 million including working capital and term loan facilities. Loans up to €250,000 are unsecured.
While the new Credit Guarantee Scheme was only launched 4 weeks ago, as of 9th October, 900 business applications have now been recommended to the credit departments of the pillar banks for final approval to a value of almost €48m. 400 applications have been approved to date for over €21m: the number of loan facilities drawn almost doubled last week.
These loans are being drawn from all over the country, with businesses which have been deeply hit by the effects of the virus leading the way. The wholesale and retail sector accounted for 22% of loans drawn by value, the accommodation and food services sector accounted for 14% of loans drawn by value, and the primary agricultural sector accounted for 10% of loans drawn by value, demonstrating that funding is getting to where it is most needed.
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. This low-cost funding along with other grants which are available provides ready access to funding for businesses during this unprecedented time.
The Scheme was developed in accordance with the European Commission’s Temporary Framework to take advantage of the relaxation of State Aid rules and a premium is charged in recognition of the State backed guarantee as required by the Temporary Framework.
A key focus of the COVID-19 Credit Guarantee Scheme is to make additional lending available to business for liquidity purposes and investment. Businesses that without the guarantee might not otherwise be able to access these facilities. Refinancing may be permitted in respect of COVID-19 related expenses that were funded through short term or temporary facilities such as overdrafts. However, any provision for potential refinance or rollover must have been agreed as part of the initial finance agreement.
The Scheme is currently available through Allied Irish Banks, Bank of Ireland and Ulster Bank Ireland. In recognition of the need to make this Scheme as widely available as possible an open-call for new on-lenders has been completed and proposals are being reviewed by the Strategic Banking Corporation of Ireland in respect of potential new lenders. I therefore expect to confirm a number of new lenders will be joining the Scheme in the coming weeks.