SME loan guarantee scheme to arrive in Q1 next year
Every €100m guaranteed will benefit over 1,200 businesses
THE long-awaited loan guarantee scheme for small business (SMEs) is to finally become a reality early next year after enterprise minister Richard Bruton detailed plans for the scheme yesterday.
The scheme, officially called a 'Temporary Partial Credit Guarantee Scheme' will proceed to draft legislation now and will be in place by the first quarter of next year, the minister said. An operator of the scheme will be appointed shortly, he added.
The programme will run for three years initially and €150m has been set aside for next year, but the scheme will be led by demand.
According to the government, every €100m guaranteed by the scheme will benefit over 1,200 businesses and provide at least €15m net to the Exchequer.
The scheme, which has been demanded by small business for some time now, is aimed at companies that may not have sufficient collateral or may not have a long enough track record with lenders to get access to credit by conventional means.
The hope is the scheme will support these 'borderline' cases, although Credit Review Office head John Trethowan has previously warned against it being seen as a "panacea" for all of the problems in the SME sector.
Credit obtained through the scheme is also expected to be more expensive than regular financing.
Reaction from trade groups was mixed last night, with ISME describing the delays in implementing the scheme as "crazy" while the Small Firms Association's Patricia Callan welcomed it but warned that the banks still need to return to what she called "normal lending patterns".
"[The loan guarantee] will address the twin difficulties of lack of collateral due to the property collapse, and the novel industries, where the skill base is not there within the banks to make an accurate assessment," she said. "However, the absence of a specific fund amount is concerning, we need a scheme within the order of €400m.
"We [also] need the Government to commit that it will meet the demand in full for guarantee funding," she added.