State-backed not-for-profit lender Microfinance Ireland (MFI) is opening from today for applications for loans of up to €25,000 for companies with 10 employees or fewer.
The new loans can run for three years with no repayments and zero interest for the first six months.
Interest paid in months six to 12 will be refunded by Government in month 13 of the three-year life of the loans, if repayments are up to date.
Interest will apply from month seven to the end period of the loan, at a rate of 4.5pc on applications made through Local Enterprise Offices or other referral partners or at a 5.5pc fixed APR for applications made directly to MFI.
An earlier €20m Covid-19 loan scheme from Microfinance Ireland launched in March was fully subscribed and closed in July.
That scheme facilitated loans of up to 50,000 and saw new loans approved for 687 businesses. In addition, 760 existing MFI customers were approved for loan moratoriums and loan restructures.
The CEO of Microfinance Ireland, Garrett Stokes, said demand for loans since the onset of the pandemic had exceeded expectations.
"We can see where the demand is coming from most and our new Covid-19 loan scheme has been tailored to meet the ongoing needs of those micro-businesses as they navigate their way through the current challenges and beyond."
The demand for MFI's loans is in contrast to comments from senior executives at the main banks, who've reported muted demand for additional credit from SMEs despite the shock of the pandemic.
Loan schemes administered by other state agencies including the State Banking Corporation of Ireland (SBCI) have faced criticism for being hard or slow to access.
A planned €2bn state-backed Credit Guarantee Scheme has been in the works for some time.
It is intended to encourage banks to lend to struggling Irish businesses because taxpayers will guarantee 80pc of any loan provided by a lender.
To qualify for the scheme, SMEs will have to show they've been adversely impact by the pandemic - including the loss of at least 15pc of actual or projected turnover or profit.
The scheme is likely to be targeted at bigger SMEs and due to be in place by October.