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SME Credit Guarantee Scheme

Credit Guarantee Scheme

COVID-19 Credit Guarantee Scheme

Credit Guarantee Scheme

The purpose of the SME Credit Guarantee Scheme is to encourage additional lending to SMEs by offering a partial Government guarantee (currently 80%) to banks against losses on qualifying loans to eligible SMEs. The Credit Guarantee Scheme does not substitute for conventional lending that would otherwise have taken place.

Scope of the scheme

The Scheme is targeted towards companies who are unable to access credit because of three distinct barriers to lending;

  • Inadequate collateral
  • Novel business market, sector or technology which is perceived by lenders as higher risk under current credit risk evaluation practices
  • Need for refinancing caused by the exit of an SMEs lender from the Irish market 

Key features of the scheme

  • Facilities of €10,000 up to €1m
  • Terms of up to 7 years
  • Term Loans, Demand Loans and Performance Bonds
  • You may be able to avail of between a three to six-month interest-only payment period (depending on the total loan duration)

The Scheme is operated on behalf of the Department by the Strategic Banking Corporation of Ireland (SBCI) and is available from the participating lenders (AIB, Bank of Ireland and Ulster Bank).

Credit Guarantee Scheme and the Customs Transit Procedure

Once the UK leaves the European Union, goods transiting the UK will be subject to duties entering the UK and again when exiting the UK.

SMEs may avail of a Revenue customs transit procedure which simplifies the customs requirements for businesses who are transiting goods through a non-EU country and removes the requirement to pay duties when the goods enter the non-EU country and again when they re-enter the EU. However, to use the Customs Transit Procedure a business must have a Revenue-authorised Comprehensive Guarantee, which covers transit through third countries, which the UK will be post-Brexit. Importantly, for the guarantee to apply to the Transit procedure the comprehensive guarantee must be in the form of an undertaking from a financial institution. The financial undertaking covers actual customs debts such as customs and taxes associated with goods transiting the UK. Without such undertaking, businesses will not be able to use the transit customs procedure – which would give rise to costs and disruption for those businesses.

To help SMEs, the Government have repurposed the Credit Guarantee Scheme (CGS) to provide counter guarantees to the banks, mitigating credit risk or need for collateral. The Credit Guarantee Scheme can now be used by businesses to back their undertaking from a bank. 

State Aid

The Scheme operates under the De Minimis State Aid rules.

A State guaranteed loan constitutes De Minimis State Aid. The aid attributable to the Scheme loan facility is calculated individually for each facility, but is typically around 20% of the value of the loan facility.

A guaranteed loan does not preclude a business from obtaining other State Aid in the form of grant funding.

No business may receive more than €200k of De Minimis State Aid, including that arising from the current Scheme application, in any rolling three-year period.

Application process for businesses

Businesses seeking to avail of the guarantee scheme can approach a participating lender. Participating lenders will make all decisions on lending. Currently, Ulster Bank, Bank of Ireland and AIB are participating in the Scheme.

The Department plays no role in the application or decision-making process, which, is fully delegated to the participating lenders.

The lender assesses viability, that is, whether the business will be able to make the necessary repayments on the credit, according to its normal assessment criteria and the decision of the lender in terms of assessing viability is final. The baseline for determining commercial viability within the Scheme should be no different from the standard viability test applied by each lender within their normal commercial SME lending procedures.

There is no automatic entitlement to receive a guaranteed facility even if a business believes it satisfies the basic eligibility criteria. The normal redress processes are available to declined businesses.

Premium charge

The borrower pays a premium which partially covers the cost of providing the guarantee. The premium can vary but for the period July 2019 to 2020 it will be 0.5%. The premium is collected annually or quarterly in advance throughout the life of the guarantee (max. 7 years) based on the annual contracted principal balance. The Scheme Guarantee Premium is the amount of money the borrower pays as a contribution towards the costs of the State providing the Scheme. As such it is analogous with an arrangement fee payable for the provision of a facility, and not an insurance premium paid to give the borrower protection against their inability to repay a facility which has been provided.

Types of eligible loans

The Scheme is designed to be able to be used to support a range of debt instruments appropriate to the borrowing needs of SMEs. Term loans and other instruments such as on-demand performance bonds will be covered by the Scheme.


  • Primary production in agriculture, horticulture and fisheries are excluded from the scope of the scheme in the light of particular restrictions under the De Minimis State Aid rules. Note the food and drinks sectors will be eligible for the Scheme.
  • Refinancing of existing debts will be excluded as the purpose of this Scheme is to facilitate additional lending into the economy. Such arrangements will continue to be dealt with by banks under their current lending arrangements. However in cases where new lending is sought along with refinancing, the availability of a guarantee in respect of the new lending element should be of assistance in providing an overall package of support to the business, including consolidation of existing debts.
  • Property-related activities will be excluded from the Scheme.

Information for finance providers interested in participating in the scheme

The Strategic Banking Corporation of Ireland (SBCI) works with lenders, large and small, that demonstrate ability to deliver the required funding advantage to eligible SMEs on terms that protect taxpayer money.

The SBCI implements a thorough application/due diligence process that is designed to mitigate risks to Irish taxpayers, European funders and to SME borrowers by ensuring that all on-lending partners have the necessary financial strength and capability to provide the required level of service to SMEs.  

Finance providers interested in participating in the Credit Guarantee Scheme should contact the SBCI for further details at sbci.gov.ie/our-partners

Progress reports

Review of Credit Guarantee Scheme



COVID-19 Credit Guarantee Scheme


The COVID-19 Credit Guarantee Scheme (CGS) has been designed to address the extraordinary economic impacts of COVID-19. This global, national and local shock to Irish businesses affects viable but vulnerable firms that operate and employ workers throughout every region of the State.

SMEs, primary producers and small Mid-Caps with employment up to 499 have an immediate and urgent need for liquidity in order to meet ongoing expenses and to prepare for a return to more normal economic trading conditions. A significant and ambitious credit guarantee scheme will assist lenders in providing liquidity to these companies and send a strong signal of support and confidence to both lenders and borrowers.

A loan guarantee scheme such the COVID-19 CGS will enable lenders to provide and /or to continue to provide urgently needed liquidity to SMEs, primary producers and small Mid-Caps, which in turn will sustain employment in vulnerable sectors throughout the country. It leverages the knowledge and lending experience of lenders with respect to their borrowers.

The COVID-19 CGS will enable businesses to continue, or to return to, trading activity more quickly than would otherwise be the case and thereby assist economic recovery. It will facilitate the ongoing working capital requirements of affected businesses and assist their reintegration into supply chains both domestically and internationally.

*TO NOTE: The Credit Guarantee (Amendment) Bill 2020 passed through the Houses of the Oireachtas on 21 to 23 July. There are now subsequent legal instruments and agreements to be completed between the Minister and the finance providers to bring the Scheme into effect. Further details will be announced on this page when the Scheme is launched and operational.

 Features of the COVID-19 CGS

 The features have been chosen with the objective of maximising the impact of the scheme for borrowers in the short to medium term and addressing their liquidity requirements. The main features are as follows:

  • This is a scheme for SMEs, Primary Producers and small Mid-Caps (defined as businesses with up to 499 employees). SMEs are expected to be the main beneficiaries.
  • In order to qualify for the Scheme, the borrower will have to declare an adverse impact of minimum 15% of actual or projected turnover or profit due to the impact of COVID-19.
  • The amount available under the COVID-19 CGS is €2 billion.
  • A guarantee rate of 80% for the State with the lenders retaining 20% of the risk of the loan.
  • The removal of any portfolio cap for individual lenders. A facility size from €10k to €1 million.
  • The products covered under the scheme may include a broad range of credit facilities including working capital and term loan facilities.
  • The scheme will permit lenders to refinance and rollover credit facilities. However, lenders will not be permitted to end existing credit facilities early or prematurely in order to artificially engineer access to the COVID-19 CGS.
  • Capital and/or interest moratoria for specific periods of time (up to one year) will be permitted under the Scheme but any decision regarding such moratoria will be at the through an agreement between the borrower and the individual lender.
  • The new Scheme has been prepared in order to comply with the terms of the European Commission’s Temporary State Aid Framework. In particular:
  • Primary agricultural, fisheries and aquaculture producers may be included.
  • A guarantee premium (fee) on each loan under the Scheme is required to be paid in addition to interest rate costs (0.25% in the first year, 0.50% in years two and three and 1% in years four, five and six).
  • The scheme will be timebound and will be available initially until 31 December 2020.
  • The rollover of loans will be facilitated but no loan included in the Scheme can extend beyond 31 December 2026.
  • The size of the loan is linked to business turnover (25% of 2019 turnover) or wage costs (double annual wage bill in 2019). The borrower and lender must demonstrate that the loan is compliant with one of these measurements.
  • There will be interest reductions on the products provided through the Scheme. The original price and the discounted price will be clearly outlined in the agreements between the finance provider and the eligible business.
  • There will be a simplification of paperwork required for microbusinesses (employing less than 10).

Credit Guarantee Scheme FAQs

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