Further to our recent briefing on the COVID-19 Credit Guarantee Scheme (which can be read here), the Credit Guarantee (Amendment) Act 2020 (the “2020 Act”), which is required in order to implement the COVID-19 Credit Guarantee Scheme (the “Scheme”), was signed into law by President Higgins on 24 July 2020.

As discussed in our original note, under the terms of the Scheme 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, 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 2020 Act has made two main changes to the conditions contained in our original briefing, namely by (i) extending the classes of SMEs to which the Scheme may apply and (ii) removing the portfolio cap from the Scheme.

Eligible Enterprises

The Scheme applies to a broader range of potential borrowers than the existing credit guarantee schemes, which are limited to SMEs. To be an eligible enterprise under the existing credit guarantee scheme a borrower must:

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

In addition to the above, under the 2020 Act a borrower may now also be eligible if it is established in the State and employs not more than 499 persons (whether or not in the State). This amendment to the eligibility criteria considerably broadens the range of potential borrowers and makes the Scheme far more widely accessible.

Portfolio Cap

The liability of the State for unpaid loan facilities under the existing credit guarantee scheme was capped at 13% of the total amounts loaned under such loan facilities. This portfolio cap has now been removed under the 2020 Act.

Comment

The Scheme is welcome news for both borrowers and lenders alike. It will provide critical liquidity to Irish businesses enabling them to overcome any difficulties presented by COVID-19. As mentioned above, further details on the Scheme can be found in our original briefing note which can be read here.