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News : Irish Last Updated: Apr 12, 2012 - 4:32 AM

Credit Guarantee Bill 2012 published; Operator for Temporary Partial Credit Guarantee Scheme announced
By Finfacts Team
Apr 11, 2012 - 3:56 PM

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The Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, today published the Credit Guarantee Bill 2012, and announced the appointment of an operator for the Temporary Partial Credit Guarantee scheme.

The scheme aims to provide much-needed credit to job-creating SMEs who currently struggle to get finance from the banks. It is intended to address market failure affecting commercially viable businesses in two specific situations – namely, where businesses have insufficient collateral, and where businesses operate in sectors with which the banks are not familiar – and provide a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.
Initially, the scheme will facilitate up to €150m of additional lending per annum to SMEs, in addition to the lending targets set for the pillar banks.

Bruton said for every €150m of additional lending, the plan is expected to benefit over 1,800 businesses. The cost per €150m of lending is €6.38m. However it's claimed this does not take into account benefits to the exchequer this lending will bring in terms of increased tax receipts and decreased social welfare payments. When these benefits are taken into account, the net gain to the Exchequer is over €25m per €150m of lending.

The Bill, which was agreed by Government last Tuesday  will provide for the establishment of a targeted Temporary Partial Credit Guarantee scheme, when enacted. The Bill will now be introduced to the Oireachtas, and it is expected that it will be enacted shortly.

The principle measures in the Bill include:

  • Empowering the Minister for Jobs, Enterprise and Innovation, to give a 75% loan guarantee;
  • Procedures for designating a lending institution as a participating lending institution;
  • Provision for the payment of a 2% premium charge to the Minister by participating SME borrowers;
  • The setting of eligibility criteria for borrowers, in line with the European Commission definition of an SME.  A qualifying enterprise must not employ more than 250 persons;
  • Provision for review of the scheme at any time.  The Government have agreed to review the scheme after one year of operation;
  • Assigning a contractor to oversee the operation of the scheme.

Bruton also announced that he has awarded a contract for the practical oversight, management and operation of the Guarantee scheme to Maynooth-based company Capita Asset Services following a competitive tendering process.

Capita Asset Services is part of Capita plc. which is a FTSE 100 Company whose prime area of business activity is the provision of Business Process Outsourcing Services.   Capita currently employs over 1,200 staff in the Republic of Ireland and almost 1,800 in total on the island of Ireland.

Capita Asset Services plans to operate the Credit Guarantee scheme from their site located in Maynooth Business Campus, County Kildare.

http://www.oireachtas.ie/ viewdoc.asp?DocID=20800&& CatID=59

http://www.djei.ie/enterprise/ smes/RIA_Credit_Guarantee_ scheme.pdf 

The Irish Banking Federation (IBF) said notwithstanding the challenging environment faced by all, IBF and its member banks remain fully committed to supporting in every way possible the SME sector as an all-important driver of economic recovery and growth. To this end, the sector has been working on a range of new initiatives to support the bank/SME relationship, which includes the following:

  • The Small Business Finance website (www.smallbusinessfinance.ie) jointly developed by IBF and Chambers Ireland, and supported by sponsors Eversheds, Mazars and Energia, which is an open resource for small businesses of all backgrounds and at various stages of development on business planning and financial management;
  • The creation of a standard small business credit application form/guidance which relates to the work of the Credit Review Office;
  • The development of a ‘Heads of Business Plan’ document in collaboration with the accounting profession, which will give rise to an agreed business plan template.

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