New Covid-19 loan scheme for small businesses to be launched

The Covid-19 Loan Scheme is in response to the required closure of the Covid-19 Credit Guarantee Scheme at the end of June 2022.
New Covid-19 loan scheme for small businesses to be launched

The Covid-19 Loan Scheme will be formally launched by Tánaiste Leo Varadkar (pictured), Agriculture Minister Charlie McConalogue, and Finance Minister Paschal Donohoe on Monday. Picture: Gareth Chaney/ Collins Photos

A new Covid-19 loan scheme offering loans of up to €1.5m is to be launched on Monday as the country grapples with the latest coronavirus wave.

The scheme which will be open to small and medium-sized businesses, including farmers, food producers, and those in the fishing industry, will see lines of low-risk, low-cost credit extended for up to six years.

The Covid-19 Loan Scheme (CLS) is a State-backed loan scheme, offering SMEs loans of between €25,000 and up to €1.5m, with terms of one to six years and unsecured up to €500,000.

To avail of the scheme, a business must have experienced an adverse impact of a minimum of 15% in turnover or profit due to the impact of Covid-19.

The loans can be used as liquidity or as working capital, for investment purposes or refinancing.

Up to 30% of new loans may be allowed for refinancing of existing short-term credit, for example, as arising due to Covid-19 impacts.

The loans will be available without security where the loan amount is less than €500,000 and will typically feature a lower interest rate than other comparable lending in the market.

The plan will be formally launched by Tánaiste Leo Varadkar, Agriculture Minister Charlie McConalogue, and Finance Minister Paschal Donohoe.

The scheme is being launched because many such small and medium-sized firms are still getting back on their feet after what has been an incredibly challenging few years.

Interest rates on loans provided under the scheme will be lower than is otherwise typically available on similar lending in the market, and will vary according to the lender.

Cohorts of lenders

Lenders participating in the scheme are separated into two cohorts. For the first, interest rates will be variable, but are capped at an initial maximum rate of 3.7% for loans less than €250,000 and 2.75% for loans of €250,000 and above.

For loans from the remaining lenders, a minimum discount of 1% relative to their standard rates will be required for loans under the CLS.

The CLS is in response to the required closure of the Covid-19 Credit Guarantee Scheme (CCGS) at the end of June 2022, which is a consequence of the ending of the European Commission’s Covid-19 State-Aid Framework.

Speaking ahead of the launch, Tánaiste Leo Varadkar said many businesses are still getting back on their feet after what has been an incredibly challenging period. 

I know Putin’s war on Ukraine has caused more uncertainty,” he said.

These State-backed loan schemes are working well, he said, with the existing Covid Credit Guarantee Scheme helping more than 10,000 SMEs to access low-cost credit.

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