New Credit Guarantee Scheme Launched

11 Jul 2018 | 12.06 pm

New Credit Guarantee Scheme Launched

Up to 80% of loans guaranteed by the state

11 Jul 2018 | 12.06 pm

The state’s new Credit Guarantee Scheme for small and medium enterprises has been formally introduced, with an increase in the loan percentage guaranteed from 75% to 80%.

Junior minister Pat Breen and representatives from lending participants Strategic Banking Corporation of Ireland, AIB, Bank of Ireland, and Ulster Bank were on hand for the announcement of the scheme, which replaces the 2012 scheme which expired in June.

The funding is aimed at SMEs that may have insufficient collateral and/or a perception of higher risk. Under the CGS, the participating banks get a government guarantee for 80% of the loan value.

Key features of CGS loans include facilities of between €10,000 and €1m and terms of up to seven years.

An eligible business must:

  • Be an enterprise that has fewer than 250 employees and either an annual turnover not exceeding €50m or an annual balance sheet total not exceeding €43m
  • Be involved in a commercial activity
  • Have a viable proposal
  • Have the ability to repay.

Minister Breen said: “The previous Credit Guarantee Scheme was effective in helping SMEs that may have had inadequate collateral; that operated in perceived higher-risk or novel business markets, sectors or technologies; and that required refinancing due to the exit of a lender from the market. 

“The relaunched scheme is designed to be even more effective. It increases the guarantee to financial providers from 75% to 80%, has a lower premium charge for the first year, and has the potential for extension beyond the banks to other financial providers.”

While borrowers get a favourable interest rate, they must also pay a maximum 2% annual premium (currently 1%) to the government, but this is offset by the lower cost of the loan.

 

Photo: Minister Pat Breen (centre), with (from left) Michael Lauhoff, BOI; Suzanne Sweeney, SBCI; Catherine Moroney, AIB; and Olaf Fitzsimmons, Ulster Bank (Pic: Iain White/Fennell Photography)

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