Under the legislation, published yesterday, the exchequer is expected to see a return of over €25m.
Enterprise Minister Richard Bruton unveiled the credit guarantee bill. Once it is enacted, the credit guarantee scheme is expected to provide finance to small businesses which do not have collateral or an established track record to access funds through traditional banking.
Mr Bruton said the scheme would help the SME sector to generate jobs.
“The credit guarantee scheme will benefit innovative, job-creating businesses that face obstacles accessing credit because they do not have enough collateral, or because they operate in sectors which the banks are not familiar with,” he said.
“These are the businesses we need to stimulate our jobs recovery, and this Government is determined to make that process easier where we can.”
The scheme will facilitate up to €150m of lending every year to SMEs at a cost of a €6.38m to the exchequer. The Government estimates that the net gain to the exchequer will be over €25m for every €150m of lending.
The State will guarantee 75% of qualifying loans against losses. It is estimated that about 1,800 small businesses will benefit.
The scheme aims to help SMEs develop a positive track record with banks so they will be able to secure further lending. It will also put Irish SMEs on a level footing with competitors in other countries where similar schemes exist.
Business bodies welcomed the bill, with both chambers Ireland and Isme claiming that the supply of credit to businesses is a positive development.
Chambers Ireland deputy chief executive Seán Murphy said: “This scheme will contribute to increasing the supply of credit to a discrete number of viable businesses that might not otherwise get credit due to the fact that they have bad balance sheets.
“The partial loan guarantee scheme can contribute to further economic normalisation with the possibility of funding underpinning the creation of new jobs and further positive momentum.”
Isme CEO Mark Fielding said EU-subsidised loan schemes in the ’90’s had been abused by banks, which had diverted the cheaper finance to blue chip companies to the detriment of the SME sector.
“It might be appropriate that the minister remind the bailed-out banks that this finance is to be additional and clearly reported on, unlike the smoke and mirrors obfuscation surrounding the previous bailout €6bn.
“The priority is to get this bill through the Oireachtas and up and running as soon as possible, together with the long-awaited micro-finance scheme, so that cash starved small and medium businesses can avail of them and begin the process of investment, resulting in job retention and creation,” he said.