On 2 May 2020 the Irish Government announced additional supports for businesses impacted by COVID-19. One of these supports is the COVID-19 Credit Guarantee Scheme (the “Scheme”).

COVID-19 Credit Guarantee Scheme

The Scheme is a re-purposing of the existing SME Credit Guarantee Scheme which was launched by the Irish Government in 2018 (the “2018 Scheme”) and which replaced the previous schemes from 2012 and 2015.

The Irish Government will guarantee up to €2bn of loans from participating Irish banks to viable micro, small and medium sized enterprises (“SMEs”) by way of an 80% guarantee of those loans. The Scheme can be used by SMEs to obtain financing from participating banks across a range of different products including terms loans, demand loans and performance bonds. The loan amounts will range from €10,000 to €1m and will be for terms of up to seven years. It may also be possible to avail of interest only periods of between three and six months, however, this will be at the discretion of the relevant participating bank.

The Scheme is operated by the Strategic Banking Corporation of Ireland on behalf of the Department of Business, Enterprise and Innovation. The participating banks under the Scheme are currently Allied Irish Banks, Bank of Ireland and Ulster Bank. It will be possible for additional lenders to access the Scheme.

Who is eligible to avail of the scheme?

Subject to certain exclusions, SMEs may be eligible for the Scheme if they:

(a) are involved in a commercial activity;
(b) are a sole trader, partnership, franchise, co-operative or limited company;
(c) have a viable business proposal (in the opinion of the lender); and
(d) are able to repay the loan.

What is an SME?

An SME:
(a) has fewer than 250 employees;
(b) has a turnover of €50m or less (or €43m or less on their balance sheet);
(c) is independent and autonomous (i.e. not part of a wider group);
(d) has less than 25% of their capital held by public bodies; and
(e) is established and operating in Ireland.

How to apply

Applications to avail of the Scheme should be made through a participating bank. All credit decisions in relation to whether or not funding will be provided shall be made by the relevant participating bank. Neither the Strategic Banking Corporation of Ireland nor the Department of Business, Enterprise and Innovation have any role in the credit decision process.

What is the cost?

The interest rate on any loan provided under the 2018 Scheme is the SME lending rate of the relevant participating bank. When announcing the COVID-19 Credit Guarantee Scheme, the Government stated that the interest rate on qualifying loans would be below market rates, however, further detail has yet to be provided.

In addition to the interest rate, a premium will be charged to the borrower which will partially cover the cost of the guarantee. The premium may vary up to a maximum of 2%, however, the the current premium is 0.5%.

When will loans be available under the scheme?

The Government have confirmed that in order to implement the Scheme new legislation will need to be passed. The new legislation required will not be passed until a new Government has been formed.