Brendan Smith: Covid-19 Credit Guarantee Scheme extension a welcome boost for SMEs

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Fianna Fáil TD for Cavan and Monaghan, Brendan Smith has welcomed the commitment from Government to extend the Covid-19 Credit Guarantee Scheme for small and medium businesses.

Deputy Brendan Smith commented, “I am very pleased to see the extension of this vitally important scheme. It is something I addressed directly with the Minister for Enterprise; Trade and Employment in the Dáil and I also urged him to ensure any and all possible initiatives will be there to support businesses impacted by the ongoing Covid-19 pandemic.

“This scheme will give small and medium businesses a level of certainty that if they need liquidity, they will be able to access low-cost loans, unsecured up to €250,000. This will help businesses react to ongoing developments and take advantage of any opportunities over the coming months.

“The COVID-19 Credit Guarantee Scheme is available through a wide range of lenders including three banks, six non-bank finance providers and 19 credit unions. Unsecured loans of up to €250,000, at reduced interest rates are available to SMEs, primary producers and small mid-caps (companies employing less than 500).”

The Cavan and Monaghan TD added: “To date the Scheme has approved loans to more than 9,000 businesses. This is the most rapid deployment of such a level of lending to businesses in the history of the state, with the Scheme operational since September 2020.

“The continuation of the Scheme for a further six months will provide options for small businesses who need increased liquidity as they move toward a changed but more stable trading environment.”

This extension has been made possible by an extension of the European Commission’s State Aid Temporary Framework, which allows exceptional aid for businesses impacted by COVID-19.

Other financial interventions for the hospitality, events and entertainment sectors includes:

– changes to the CRSS or EWSS

– an extension of the targeted commercial rates waiver at least until the end of March

– an extra €25 million from the Covid contingency fund applied to the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media, in particular to assist the live entertainment, arts and performance sectors.

The PUP was also reopened for workers who have lost their jobs as a result of Covid-19 restrictions.

ENDS

NOTES

Brendan-Smith-PQDownload

See attached PQ from Deputy Brendan Smith 

The CCGS was developed specifically in response to the COVID-19 pandemic and was launched in September 2020 to provide access to appropriate finance for SMEs and small mid-caps. The scheme is operating under the Temporary State-Aid Framework which was initially due to expire at the end of December 2020. However, the European Commission has approved the latest extension of the Temporary State-Aid Framework to the end of June 2022. Subsequently, Ireland has availed of this opportunity and extended the CCGS to the end of June 2022.

The €2 billion lending cap was set in 2020 to give confidence to the business community that lending would be available to meet their needs resulting from the impact of COVID-19. It also gave confidence to the market and was set as a ceiling and not a target.

Features of the Covid-19 Credit Guarantee Scheme

The features have been chosen with the objective of maximising the impact of the scheme for borrowers in the short to medium term and addressing their liquidity requirements. The main features are as follows:

  • This is a scheme for SMEs, Primary Producers and small Mid-Caps (defined as businesses with less than 500 employees). SMEs are expected to be the main beneficiaries.
  • In order to qualify for the Scheme, the borrower will have to declare an adverse impact of minimum 15% of actual or projected turnover or profit due to the impact of COVID-19.
  • The amount available under the CCGS is €2 billion.
  • A guarantee rate of 80% for the State with the lenders retaining 20% of the risk of the loan.
  • No portfolio cap for individual lenders.  A portfolio cap has been a feature of previous CGS.  However, the removal of the cap for the CCGS is essential in order to ensure lenders provide an interest rate reduction to borrowers and also comply with the Capital Requirements Regulation. 
  • The current standard facility size of €10k to €1 million under the current Acts will remain for the CCGS.
  • The products covered under the scheme include a broad range of credit facilities including working capital, asset finance and term loan facilities. 
  • The Scheme has been prepared in order to comply with the terms of the European Commission’s Temporary State Aid Framework.  In particular:
  • Primary agricultural, fisheries and aquaculture producers are included.
  • A guarantee premium on each loan under the Scheme is required to be paid in addition to interest rate costs (For SMEs it is 0.25% in the first year, 0.50% in years two and three and 1% in years four, five and six).
  • The scheme will be timebound and will be available until 30 June 2022.
  • The rollover of loans will be facilitated but no loan included in the Scheme can extend beyond 30 June 2028. 
  • The size of the loan is linked to business turnover (25% of 2019 turnover) or wage costs (double annual wage bill in 2019).  The borrower and lender must demonstrate that the loan is compliant with this.

18/01/2022