Credit Guarantee Scheme for Irish SMEs
The purpose of the SME Credit Guarantee Scheme is to encourage additional lending to SMEs by offering a partial Government guarantee (currently 80%) to banks against losses on qualifying loans to eligible SMEs. The Credit Guarantee Scheme does not substitute for conventional lending that would otherwise have taken place.
Key features of the Credit Guarantee Scheme
- Facilities of €10,000 up to €1m
- Terms of up to 7 years
- Term Loans, Demand Loans and Performance Bonds
How to for the Credit Guarantee Scheme
Businesses seeking to avail of the guarantee scheme can approach a participating lender. Participating lenders will make all decisions on lending. Currently, Ulster Bank, Bank of Ireland and AIB are participating in the Scheme. The Department plays no role in the application or decision-making process, which, is fully delegated to the participating lenders.
Refinancing of existing debts is excluded as the purpose of this Scheme is to facilitate additional lending. However in cases where new lending is sought along with refinancing, the availability of a guarantee in respect of the new lending element should be of assistance in providing an overall package of support to the business, including consolidation of existing debts Property-related activities are also excluded.
Who can apply to the scheme?
Viable micro, small and medium sized enterprises (SMEs).
SMEs are defined by the Standard EU definition [Commission Regulation 2003/361/EC] as enterprises that:
- have fewer than 250 employees
- have a turnover of €50 million or less (or €43 million or less on their balance sheet)
- are independent and autonomous i.e. not part of a wider group of enterprises
- have less than 25% of their capital held by public bodies
- is established and operating in the Republic of Ireland
A Small Mid-Cap is an enterprise that is not an SME but has fewer than 500 employees
Who cannot apply to the scheme?
- Are involved in the primary agriculture, horticulture and fisheries are excluded from the scope of the scheme in the light of particular restrictions under the De Minimis State Aid rules. Note the food and drinks sectors will be eligible for the Scheme.
- Are in financial difficulty (excluding cashflow pressures caused by COVID19 virus impact)
- Are bankrupt or being wound up or having its affairs administered by courts.
- In the last 5 years has entered in to an arrangement with creditors, in the context of being bankrupt or wound-up or having its affairs administered by the courts.
- Are convicted of an offense concerning professional misconduct by judgement, fraud, corruption, involvement in a criminal organisation, money laundering or any other illegal activity where such illegal activity is detrimental to the European Union’s financial interests
What is the interest rate on these loans?
The interest rate charged on the loan will be the banks SME lending rates. In addition the borrower pays a premium which partially covers the cost of providing the guarantee. The premium can vary but is currently 0.5%. The premium is collected annually or quarterly in throughout the life of the guarantee (max. 7 years) based on loan balance.
Is there an interest only option?
You may be able to avail of between a three to six-month interest-only payment period (depending on the total loan duration). This will depend on your lender’s assessment of your application.
What types of loans can be applied for under the scheme?
The scheme is designed to support a range of debt products appropriate to the borrowing needs of SMEs. Term loans and other products such stocking facilities, performance bonds will be covered by the Scheme.
What will I have to do to apply for a loan under the scheme?
Engage with the Bank(s) to begin their standard loan application process. It is only at this stage that a decision will be made on credit approval.
Source: Department of Business, Enterprise & Innovation (July 2020)
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