16th September 2015
Minister for Business and Employment Ged Nash T.D. today (Wednesday, 16th September) published the Credit Guarantee (Amendment) Bill 2015, which aims to improve the uptake amongst SMEs of the credit guarantee scheme introduced in 2012.
Announcing the publication of the Bill, Minister Nash said: “The Credit Guarantee Scheme, while being somewhat successful and supporting over 1,600 jobs since 2012, has not reached the demand level that we originally envisaged. I believe that improvements brought forward in this Bill will ensure wider take up by our SMEs.”
“It is vitally important that Government continues to be proactive in its SME finance initiatives and this Bill is an essential part of that plan. As a Government, we are quite prepared to listen to our SMEs when things are not going to plan and we are more than prepared to amend and improve things where necessary, to ensure that our SMEs have the best supports available. This Bill is a clear example of our willingness to review, renew and relaunch.”
The Credit Guarantee Act 2012 and the Credit Guarantee Schemes made under it were designed to address the competitive disadvantage experienced by SMEs with little collateral and/or operating with new and challenging business models, which were finding it difficult to access bank finance. The development of such schemes places Irish SMEs on a more competitive footing relative to trading competitors who often avail of loan guarantees in their own country to support trade and investment.
A review of the legislation was completed in 2014 and concluded that, while the Scheme had merit, its complexity, the narrow range of products covered and the apparent disproportionate skewing of risk distribution in favour of the State as guarantor made it unattractive to the banks to operate. The review proposed changes in respect of procedure simplification, the term of the guarantee, risk sharing and product range. These are all addressed in the new Bill.
The amendments contained in the Bill propose:
(i) to change the definition of lender to permit the Minister to certify additional financial product providers such as lessors, factors, invoice discounters and other non-bank financiers;
(ii) to change the definition of loan agreements to include non-credit products such as invoice finance and leasing, and to include overdrafts;
(iii) to rebalance the risk between the State and finance providers; and
(iv) to charge an appropriate premium for the Guarantee.
Concluding, Minister Nash said: “The purpose of these various changes to the primary legislation is to provide a flexible guarantee framework which will allow Ministers to make such guarantee schemes as are actually required by SMEs, to drive additional lending up to €150 million per annum and, in the long term, to secure sustainable businesses and jobs.”
Credit Guarantee (Amendment) Bill 2015
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