Credit Guarantee Scheme changes to help SMEs get loan finance

The Minister for Business and Employment Ged Nash TD this week announced changes to the Credit Guarantee Scheme which will assist more small and medium sized enterprises (SME ) to get loan finance.

The Credit Guarantee Scheme aims to help viable businesses which have been refused conventional bank credit facilities access a state-backed guarantee for 75 per of their loan.

There are two changes to the scheme:

— To allow for refinancing loans where an SME’s bank is exiting the Irish SME credit market

— To extend the maximum length of the guarantee from three to seven years.

Up until now, the Credit Guarantee Scheme was only available to businesses applying for new loans and was not available to companies who wished to move loans from a bank which is exiting the Irish market.

Minister Nash said, “Thousands of people in the SME community have been affected by the exit of some foreign banks from the business credit market here. One of the impacts of the economic recession is that many of these small businesses who have managed to survive and keep people in jobs are now under-capitalised.”

“The problem arises when these SMEs seek refinancing loans, often with relatively short timeframes, and are not able to meet the minimum stake requirements of the remaining banks. The changes to the Credit Guarantee Scheme I am announcing today mean they will be able to access this State Guarantee and this will greatly assist them in getting refinancing loans from the remaining banks.”

Since its inception in 2012, the Credit Guarantee Scheme has helped to create 649 jobs and maintain a further 333. Some 156 businesses have availed of the scheme to date with loans of approximately €20 million backed by the guarantee.

Minister Nash continued, “Clearly the job creation element of the Credit Guarantee Scheme is very welcome but overall it has not had the impact that we had hoped for. I believe that the changes we are introducing today will mean that many more SMEs will be able to avail of the scheme. This in turn will mean more jobs can be created by SMEs and they may also catch a break when it comes to being able to avail of better deals on their loans as a result of some banks exiting the market.”

The Credit Guarantee Scheme provides a 75 per cent guarantee to banks against losses on qualifying loan facilities. Bank of Ireland, AIB and Ulster Bank are participating lenders. The borrower pays a two per cent annual premium, which partially covers the cost of providing the guarantee.

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