Finance Minister Paschal Donohoe has signalled caution over the inclusion of 100% State-backed loans in the SME credit guarantee scheme element of the Government’s pending multi-billion stimulus package for the economy.
As part of a reboot of an existing SME scheme, the Government will guarantee up to €2bn of loans from Bank of Ireland, AIB and Ulster Bank. The current proposal is for the State to guarantee the banks against 80% of any losses from each loan, while the banks will guarantee the remaining 20%.
The Government has been criticised for lagging other EU countries in its level of financial support for Covid-hit businesses. New figures, this week, showed that Britain has delivered nearly one million loans – with a combined value of €32bn – to companies through its 100% Government-backed loan scheme.
Opposition parties here have called for 100% State-backed loans to be included in the credit guarantee scheme for SMEs and employers’ group Ibec said such loan terms are essential for small firms to recover.
“We’re clearly looking at options to better meet credit and working capital needs of Irish companies. However, I remain strongly of the view that those who are lending out that credit and making money available should have a stake in ensuring that this is a successful loan that is right for the person or company taking it and that they have an ability to recover that loan in the future,” Mr Donohoe said.
A spokesperson in the Department of Finance said it remains too early to call if 100% state-guaranteed loans will be part of the mix, but they said the Minister is cautious about their inclusion. Tánaiste Leo Varadkar has also warned against the State taking on all of the risk from business loans.
“We are looking at options in relation to the credit guarantee scheme and how that can be even more effective,” Mr Donohoe said.
He said that while he understands the growing demands for additional support from different sectors of the economy, if he was to meet every single demand the sum total could easily exceed the amount of tax the Government will collect this year.
