SME Credit Guarantee Scheme Must Do More

Chambers Ireland has called on the Government to make a number of changes to the existing SME Credit Guarantee Scheme to make it more effective. The call comes following a meeting with consultants appointed to review the scheme, at which Chambers Ireland made a number of recommendations.

Speaking this morning, Seán Murphy, Chambers Ireland Deputy Chief Executive said, “The SME Credit Guarantee Scheme has the potential to really benefit a greater number of SMEs. However, restrictions currently in place on the scheme have significantly impeded take up and reduced the potential impact of the scheme. Given that the most common reason for applying for the scheme was working capital, a key issue for businesses at the moment, it is clear that many more businesses could benefit from enhanced flexibility.”

“According to the most recent quarterly report, the scheme was taken up by 47 companies, with facilities of €5.9m and an estimated employment impact of 273 new jobs created and 115 jobs maintained.[1] This is as opposed to an approximate target of €150m in drawdown per annum. The report also recognised that uptake was disappointing and lower than anticipated.”

Chambers Ireland made a number of recommendations as to how the scheme can be improved:

• Increase the level of guarantee. At present, the level of guarantee is quite low and is often not enough to get a credit application approved.
• Increase the number of financial products and sectors applicable under the scheme. Currently, facilities such as overdrafts and re-structures are excluded along with a number of sectors such as agriculture. Given that working capital is the vital issue for business at present, the Credit Guarantee’s remit should be broadened to embrace a wider range of sectors and offerings.
• Remove the requirement to apply for a bank loan and have it rejected prior to availing of the scheme. A business should be able to apply for financing under the scheme at first application rather than have to wait until the application has been rejected by its bank using normal processes to make an application.
• Increase the term of the guarantee to at least five years. Many SME loans are for periods that are longer than three years, accordingly the term lengths of the guarantee need to be more flexible with the potential to extend a loan guarantee to a period that matches this reality in the market.

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