Cheaper loans in June to help business, farmers cope with Brexit

New Brexit Impact Loan Scheme on the way

Tánaiste Leo Varadkar and Agriculture Minister Charlie McConalogue have welcomed the new Brexit loan scheme which will be launched in June. Picture: Julien Behal Photography

About €130m in cheap loans will become available to food businesses, farmers, and fishers in mid-2021, through the new Brexit Impact Loan Scheme.

It will make up to €330m of lending in total available to help businesses continuing to respond to Brexit.

The Government has called on all financial providers, banks and credit unions to take part in the scheme.

It is intended that the scheme will be open to businesses of up to 499 employees, as well as farmers and fishers.

Loans under the scheme will range from €25,000 to €1.5m, and will be available for liquidity or investment purposes, as well as for refinancing of specific forms of existing debt.

Loans will be for terms of one to six years with a discounted interest rate, and loans of up to €500,000 will be available unsecured.

It will help viable but vulnerable businesses that are impacted by Brexit and experiencing liquidity challenges, or business owners who wish to invest in their businesses.

Compared to similar earlier schemes, a requirement to show innovation in business has been dropped.

Accelerated progress of legislation for the scheme in the houses of the Oireachtas was facilitated by opposition parties, without the legislation going through the full committee procedures.

“We hope to get it signed before the end of May and to get this money into the system in June,” said Minister of State at the Department of Business, Enterprise and Innovation Damien English.

He said it was imperative that ministers are granted the necessary powers to enter into the agreement with the Strategic Banking Corporation of Ireland in June, including providing necessary executor funding for the scheme.

Executor cost of up to €29m will be covered on a 60:40 basis by the Departments of Enterprise, Trade and Employment, and of Agriculture, Food and the Marine (the DAFM contributes 40% on the basis that 40% of the scheme will be used by food businesses and primary producers).

The Brexit impact loan scheme will be underpinned by a counter-guarantee through the European guarantee fund, which is managed by the European Investment Fund on behalf of the European Commission.

The effect of the counter-guarantee is to allow for a scheme of up to €330m, with a multiplier effect of the State funds by more than a factor of ten.

The counter-guarantee, through the European guarantee fund, offers a 50% risk cover which will be matched at 24% by the Government through the Strategic Banking Corporation of Ireland, to provide an 80% uncapped guarantee to lenders participating in the scheme.

The monitoring of these loans and their drawdown is done by the Government’s SME and State Bodies Group, and the Credit Review Office.

“The objective is to make products available at much lower interest rates than currently available,” said Minister of State English.

“All of the credit guarantee schemes being offered so far are 4% down.

“The majority of the 3,700 loans drawn down are in the 2.5% to 3% category, which is a reduction of between 2% and 4% on almost every other product out there.”

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar said: “The pandemic has masked the effects of Brexit.

“We don’t really know yet how much of the trade impact has been caused by Brexit and how much by the virus.

“Businesses will continue to need help as the situation unfolds and especially when Britain introduces its border and customs controls later this year. ”

Minister for Finance Paschal Donohoe said: “It is my hope that we can make the Scheme available to Brexit impacted businesses through as wide a range of channels as possible.”

Agriculture Minister Charlie McConalogue said: "Access to finance is a critical need.

“This Scheme will deliver important support to farmers, fishers, food businesses and to businesses generally as we seek to ensure their ongoing viability will not be hindered by a lack of suitable finance.”