€2 billion low-cost loan scheme opens for farms and small businesses

The new credit guarantee scheme is being launched today (Monday, September 7) for farms and small businesses impacted by the pandemic to apply for low-cost loans.

The €2 billion Covid-19 Credit Guarantee Scheme, which is the “largest credit guarantee scheme for businesses in the history of the state”, will make loans from €10,000 up to €1 million available for small to medium-sized businesses along with primary producers (farmers and fishers).

According to Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar, improvements to the previous credit guarantee scheme will provide “much needed liquidity as our economy continues to open”.

“We want to help viable businesses get through the difficult phase of reopening and deal with the new realities and challenges posed by Covid-19,” Minister Varadkar said.

“The past few months have had a devastating impact. The personal and economic toll that Covid-19 has taken on every family, community and business is unprecedented.

The scheme will provide low-cost loans to businesses and will, in turn, help more people to get back to work.

The changes that have been made to the existing Credit Guarantee Act 2012 (as amended) will bring the scheme into line with similar schemes across Europe, according to Minister Varadkar.

Commenting on the opening of the scheme today, Minister for Agriculture, Food and Marine Charlie McConalogue said:

‘‘Liquidity is crucial for businesses and it is especially important that at this time, when faced with an unprecedented challenge in the form of COVID-19, that the government is there to support them.

“Farmers, fishers and food businesses can avail of the scheme to ensure that the disruptions caused by the pandemic do not undermine the ongoing viability of food production.

“It will ensure the continuity of economic activity in rural and coastal areas and ensure security of food supply at home and for export.’’

As with other credit guarantee schemes, the Covid-19 Credit Guarantee Scheme will be operated by the Strategic Banking Corporation of Ireland (SBCI) and will be available through three banks: AIB; Bank of Ireland; and Ulster Bank.

These changes are expected to allow the removal of the portfolio cap, which limits the state’s exposure to 13% of the loan facilities included in the scheme.

The risk share of 80% for the state and 20% for the finance provider remains in place.

Applications for loans under the scheme will close at the end of this year.

Key features of the Covid-19 Credit Guarantee Scheme:

  • The amount available under the Covid-19 CGS is €2 billion;
  • This is a scheme for SMEs, primary producers and small mid-caps;
  • 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 removal of any portfolio cap for individual lenders;
  • The current standard facility size of €10,000 to €1 million under the current acts will remain;
  • The products covered under the scheme will include overdrafts, working capital and term-loan facilities;
  • A guarantee premium on each loan is required to be paid in addition to interest rate costs;
  • The scheme will be time-bound and will be available initially until December 31, 2020;
  • The rollover of loans will be facilitated but no loan included can extend beyond December 31, 2026.