Credit Guarantee Bill Amended For SMEs

1st February 2016

Posted In: FYI
Establishing credit

The Minister for Business and Employment, Ged Nash TD, has today welcomed the passing of all stages of the Credit Guarantee (Amendment) Bill 2015.  The bill has now been sent to President Higgins to be signed into law this week.  

The Credit Guarantee Scheme aims to help viable businesses which have been refused conventional bank credit facilities access a state-backed guarantee. When it was originally introduced the guarantee covered 75% of their loan.  The borrower pays a 2% annual premium, which partially covers the cost of providing the guarantee.

The extension to the Bill should make it easier for small and medium sized businesses to get access to finance.  The main changes to the Credit Guarantee scheme include:

Broadening of the definition of lender in order to cover additional financial product providers such as lessors, invoice discounters and other non-bank financiers

Changing the definition of loan agreements to include non-credit products such as invoice finance and leasing, and to include overdrafts;

–  Re-balancing the level of risk between the State and the extended finance providers, with the State taking an 80% share, up from 75% previously

–  Enabling State institutions like the Strategic Banking Corporation of Ireland to work with the Minister to enhance the provision of credit to SMEs

–  Empowering the Minister to give counter-guarantees that will enable the SBCI to unlock matching guarantee facilities from EU sources and thus better share the risk across the banks, the SBCI, the Minister and the EU sources.

Commenting on the new legislation, Minister Nash said: “This legislation reflects mine and the Government’s on-going commitment to provide better access to finance for Irish SMEs. We introduced the Credit Guarantee Act 2012 early in our term to help small businesses to access much needed finance.  But, we kept this new law under review, and listened to the needs of our SMEs so that we could see how we could improve it.”