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
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%
Procedures for designating a lending institution as a participating lending
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.
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
- 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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