Varadkar confirms details of €2 billion Credit Guarantee Scheme

Details of the “largest credit guarantee scheme in the history of the state” have been confirmed by Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar.

The legislation for the new Covid-19 Credit Guarantee Scheme (CGS), which will make “low-cost loans available” to businesses and primary producers following the impact of Covid-19, is expected to go through the Oireachtas next week.

Small and medium-sized enterprises (SMEs) are expected to be the main beneficiaries.

‘Help businesses get through a difficult time’

According to Minister Varadkar, improvements to the previous 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 scheme will provide low-cost loans to businesses and will, in turn, help more people to get back to work.

The legislation is expected to go through the Oireachtas next week, with the existing Credit Guarantee Act 2012 (as amended) changed to put in place extra measures of the Covid-19 CGS.

As with other credit guarantee schemes, the Covid-19 CGS 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.

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.