Government opens €2bn loan scheme to help businesses in Ireland

As Irish businesses respond to Covid’s repercussions, the Irish Government has launched a new assistance program to provide low – interest loans.

Regarded as the largest state-backed loan guarantee in Ireland ever, the scheme will benefit most Irish businesses, including those in the farming and fishing sectors.

The latest scheme unveiled yesterday (Monday) is a €2 billion Covid-19 Credit Guarantee Scheme. Government said the new scheme would be very useful to offset the economic damage caused by the pandemic.

The government also said it is using a good credit rating to help Irish businesses borrow at lower rates. Most Irish small and medium-sized businesses have no debts and some do not want to take on further debts.

Leo Varadkar, Tanaiste and Minister for Enterprise, Trade and Employment, said on Monday that the past few months have been difficult for Irish businesses. “The Government is determined to help businesses as they operate in a fundamentally changed trading environment,” Varadkar said.

“This scheme will provide low cost loans from €10,000 to €1 million to businesses, in addition to the grants that are already available. Businesses can apply directly to a participating bank. Under the scheme the Government will provide an 80% guarantee for the loan. This unprecedented measure will ensure businesses have access to the finance they need at this unprecedented time,” the Tanaiste added.

The credit guarantee scheme is an important part of the government’s July Stimulus package. There are €7.4 billion initiatives intended to promote job-driven recovery and improve financial morale while continuing to counter the effects of Covid-19.

Loans under the scheme range from €10,000 to €1 million. Although interest rates vary depending on the loan, the government has stated that they will be lower than what is available in the market.

The scheme offers an 80% government guarantee to participating banks to provide qualifying small and medium-sized enterprises with low interest loans of up to six years. Companies can contact the participating financial provider directly to apply for the scheme.

Finance Minister Paschal Donohoe said the plan was a key component of the government’s efforts to help fund and settle small and medium enterprises.  

“The priority given by Government to SMEs has been reflected in the range of business supports that have been made available including the warehousing of up to €2 billion of tax liabilities by the Revenue Commissioners, the €2 billion Pandemic Stabilisation and Recovery Fund being implemented by Ireland Strategic Investment Fund, the waiving of commercial rates and the wage subsidy scheme that enabled businesses to retain their staff,” Donohoe said.

The range of liquidity options available to businesses will be expanded. The project will help SMEs survive this difficult financial period and support business owners.

Minister for Public Expenditure and Reform, Michael McGrath TD said: “We also look forward to seeing the lending channels for this scheme being extended to also include non-bank lenders.”

At a time when businesses are facing unprecedented challenges, it is important that the government is there to support them, Minister for Agriculture, Food and Marine, Charlie Mc Conalogue TD said.

“As all sectors of the economy adjust and adapt to their new circumstances, an initiative such as the Credit Guarantee Scheme can play a vital role in financing and sustaining a recovery.”

He added that the new scheme would ensure the continuity of economic activities in the coastal areas and ensure the security of food supply at home and in exports.

The scheme is managed by the SBCI and distributed by participating financial providers. At first, the programme focuses on term loans, although support for other loan items may be included in the future, such as overdraft facilities and working capital loans.

SBCI CEO Nick Ashmore said that, “In bringing the Covid-19 Credit Guarantee Scheme to market the Government has provided Micro businesses, SMEs and Small Mid-Caps with the opportunity to access to lower-cost funding during this challenging period.”

The expansion of the scheme to include Primary Producers and the provision of unsecured loans of up to €250,000 has significantly expanded the scope and impact of the scheme. The SBCI is delighted to continue playing its part in supporting Irish SMEs as they seek to access finance,” he added.

As a result of Covid-19, businesses are required to declare a reduction of 15% in their turnover or expected turnover.

Initially the participating financial providers will be AIB, Bank of Ireland and Ulster Bank. The COVID-19 Credit Guarantee Scheme operates under the Irish State Aid Temporary System, implemented in response to the pandemic, which will provide medium to long-term liquidity financing.

The plan will be available by the end of 2020.