SMEs affected by the Covid-19 pandemic can borrow up to €1m through the largest credit guarantee scheme in the history of the State.
Today (7 September), applications opened for the Government’s €2bn Covid-19 Credit Guarantee Scheme for SMEs.
First announced back in July, the scheme makes low-cost loans available to businesses impacted by the pandemic, providing a State guarantee for 80pc of borrowings.
This is the largest credit guarantee scheme in the history of the State. To qualify, SMEs will have to declare an adverse impact of at least 15pc of actual or projected turnover due to Covid-19.
The scheme will be operated by the Strategic Banking Corporation of Ireland and will be available through three banks: AIB, Bank of Ireland and Ulster Bank.
Loans of between €10,000 and €1m will be available under the scheme, which will be available until the end of the year.
Dealing with the impact of Covid-19
The scheme, which was described by Tánaiste and Minister for Business Leo Varadkar, TD, as an “unprecedented measure” to provide financing to SMEs, will initially focus on term loans. Support for overdraft facilities and working capital lending may be added in the future.
Businesses that are eligible will be able to take out term loans that will be repayable over a maximum of six years. The rate of interest will vary according to the terms of the loan, but the Government said the interest will be lower than normal market rates.
In order to put the scheme in place, the Government has to make legislative changes to the existing Credit Guarantee Act 2012, including the removal of the portfolio cap and an increase to the size of the scheme to take account of the needs of businesses during the pandemic.
Nick Ashmore, CEO of the Strategic Banking Corporation of Ireland, said: “In bringing the Covid-19 Credit Guarantee Scheme to market, the Government has provided micro-businesses, SMEs and small mid-caps with the opportunity to access lower-cost funding during this challenging period.
“The expansion of the scheme to include primary producers and the provision of unsecured loans of up to €250,000 has significantly expanded the scope and impact of the scheme.”
According to RTÉ, the Credit Guarantee Scheme has been criticised by some business leaders who question whether SMEs are looking to take on debt they may not be in a position to pay back due to the unprecedented circumstances caused by the pandemic.