Government Covid loan guarantee scheme is set to run until December

The move is in line with a European Commission proposal

Donal O'Donavan

March 26 2021 02:00 AM

The Government’s €2bn Credit Guarantee Scheme for businesses hit by the Covid pandemic is to be extended and will remain open for applications until the end of the year.

As of March 12, 5,271 loan applications have been made under the scheme, amounting to €358.33m.

This is the second time the scheme, which was originally supposed to run from September to the end of last year, has been extended.

The move is in line with a European Commission proposal to extend a looser framework for dealing with state aid issues during Covid, which frees government’s hand to extend aid to businesses here.

The programme offers SMEs an 80pc State guarantee on short- to medium-term loans of up to €1m,

Uptake for the loans, which are approved and issued by banks and non-bank lenders with a state guarantee, had been slow in the initial months of the scheme in part because small business owners were cautious about taking in debt during a period of extreme uncertainty.

Interest has shown signs of a pick up since December.

That recent increase in lending volume was boosted by the addition in mid-January of 19 credit unions and four non-bank lenders alongside AIB, Bank of Ireland and Ulster Bank as 'on-lenders' for the subsidised money. Three more non bank lenders are close to being added to the lending roster.

One of the non-bank lenders, peer-to-peer finance company Linked Finance, provided €3m in loans in its first month of operating under the scheme, touting its 24-hour credit decision time as a key factor.

According to the Department of Enterprise, the majority of businesses using the scheme to date have been those with under ten employees, in the retail, accommodation, construction and agriculture sectors.

The latest figures from the Department show €7.6m of loans to 150 business in the week to March 11, which was down on the relatively high volumes over the previous month including €13m of lending in the first week of March and €16.8m in the last week of February.

Loans range from €10,000 to €1m for terms of up to 5.5 years. Loans under €250,000 do not require any personal guarantees or collateral. Interest rates vary depending on the loan, but are lower than prevailing market rates.