State set to extend €2bn Credit Guarantee Scheme deadline after poor take-up

Minister for Public Expenditure and Reform Michael McGrath launched the Credit Guarantee Scheme in September

Jon Ihle

November 12 2020 02:30 AM

THE Government is set to extend the €2bn Credit Guarantee Scheme (CGS) beyond the December 31 deadline following poor take-up of the programme since its launch in September, the Irish Independent understands.

According to multiple sources with direct knowledge of the scheme's operation, the Government is expected to seek an extension of the CGS and other Covid-19 programmes in line with the European Commission's Temporary Framework for State Aid.

The Commission prolonged the Temporary Framework on October 13 for a further six months to the end of June 2020, enabling member states to extend their Covid-19 financial support programmes as required.

The move would allow the Government and participating finance providers to pump further essential liquidity into small businesses struggling with the effects of the pandemic and related lockdown restrictions.

The CGS has had poor take-up to date, with barely €48m in lending to 832 businesses through the end of October, according to recentfigures from the Department of Business, Enterprise and Innovation (DBEI).

The scheme, which provides an 80pc State guarantee on loans to SMEs affected by Covid, reduces risk for lenders and offers favourable terms for borrowers. But according to banking sources, appetite for the loans is limited despite an increase in inquiries about the scheme in the last month – attributed to the commercial uncertainty around the impact of the Level 5 lockdown.

The Temporary Framework was initially set to expire at the end of the year, but the Commission pushed back the deadline last month amidst a second wave of coronavirus across the EU.

"The Department monitors and reviews our loan guarantee schemes on an ongoing basis to ensure that appropriate supports for access to finance remain in palace to help businesses as they deal with the significant challenges arising from the Covid-19 pandemic, as well as Brexit," a DBEI spokesperson said in a statement.

Separately, the Strategic Banking Corporation of Ireland, which administers the CGS, announced that Permanent TSB will now be taking part in the Government's Future Growth Loan Scheme (FGLS), providing low-cost funding to Irish SMEs.

PTSB will be offering €50m in lending through the scheme, which also provides an 80pc guarantee from the State. The FGLS has been relatively successful – providing €600m to more than 3,000 firms – and was expanded to assist with the pandemic this year.