€450million Credit Guarantee Scheme Goes Live
€450million Credit Guarantee Scheme Goes Live as 87% of Q3 measures delivered under Action Plan for Jobs Third Progress Report – Taoiseach, Tanaiste, Minister Bruton. Scheme expected to benefit 5,600 businesses and support the creation of 4,000 jobs over three years
The Credit Guarantee Scheme will go live next Wednesday 24th October, and is expected to provide an additional €150million in lending for small businesses per year over the next three years.The announcement was made today [Wednesday] by the Taoiseach, the Tánaiste and the Minister for Jobs, Enterprise and Innovation, who also announced that 58 out of 67 measures scheduled in the Action Plan for Jobs to be delivered in the third quarter of 2012 have been implemented. All actions scheduled for delivery in Q1 and Q2 have now been implemented, meaning an overall implementation rate of 96% so far this year.
The Credit Guarantee Scheme aims to provide much-needed credit to job-creating SMEs who currently struggle to get finance from the banks. It is intended to address market failure affecting commercially viable businesses in two specific situations – namely, where businesses have insufficient collateral, and where businesses operate in sectors with which the banks are not familiar. It provides a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.
Initially, the scheme will facilitate up to €150m of additional lending per annum to SMEs, in addition to the lending targets set for the pillar banks. The Scheme will be demand-led, and take-up and performance will be closely monitored.
For every €150million of additional lending, the Scheme is expected to benefit over 1800 businesses and create over 1300 jobs. The cost of the Scheme per €150million of lending is €6.38million. However this does not take into account benefits to the exchequer this lending will bring in terms of increased tax receipts and decreased social welfare payments. When these benefits are taken into account, the net gain to the Exchequer is over €25million per €150million of lending, representing a 400% return on the State’s investment.
Among the Q3 measures delivered under the Action Plan for Jobs 2012, the Government:
· Launched the Microfinance Fund which has been open for business since October 1st 2012. The Fund will provide for loans of up to €25,000 for viable businesses with less than 10 employees who have had difficulty accessing credit from the banking sector. Up to €40 million in additional lending will come from the fund in the next 5 years. The scheme can be extended to provide an additional €50 million over the following 5 years.
· Established new Technology Centres in Cloud Computing, Learning Technologies and Financial Services. These are collaborative entities established and led by industry, focused on research with a direct impact on industry.
· Enacted legislation that will ensure procedurally–robust wage setting mechanisms.
· Launched Smart Futures, a science, technology, engineering and maths (STEM) careers partnership between ICT Ireland, the Irish Medical Devices Association, Engineer’s Ireland (STEPS) and SFI/Discover Science and Engineering.
The Taoiseach said:
“Getting Ireland working again remains the top priority of the Government and in the Action Plan for Jobs we have an essential tool in building the new economy. Through the Action Plan we will add to the growing trend of private sector job creation which builds on the 17,000 private sector jobs created since March 2011. All actions scheduled for delivery in the first and second quarter of 2012 have been successfully delivered and 58 out of 67 measures scheduled for the third quarter have been implemented. The focus now is to get all remaining measures delivered before the end of the year.
I am delighted that the Credit Guarantee Scheme is being launched this morning. The Government recognises that the small business sector will be essential to our mission of getting Ireland working again. Alongside the recently launched Microfinance Scheme, the work through the Credit Review Office and directly with the Banks, the Scheme is part of the suite of measures the Government is undertaking to improve access to finance for small businesses.”
The Tánaiste said:
“Promoting growth and job creation remains our biggest challenge as a country and as a Government. We must continue to pursue a wide range of strategies to ensure that we create the right environment for job creation. I welcome the achievement of 87% of the Action Plan for Jobs measures due in Q3 of 2012. We must continue to push hard, across the system, to realise the entirety of this Action Plan on Jobs.
Today’s launch of the Credit Guarantee Scheme is another important step forward. It is part of our broader strategy to provide credit to business and recognises the central importance of the small business sector to Ireland’s continued recovery.”
The Minister for Jobs, Enterprise and Innovation said:
“The Irish economy is currently in transition, and the Government’s plan is aimed at supporting that process, creating a powerful engine of indigenous enterprise and rebuilding an economy based on enterprise, exports and innovation. Through continued strong implementation of the plan we are determined to ensure that we can continue to see positive news like the recent investments, supported by my Department, by companies like EA Games, Northern Trust, Kerry Group and Stiefel”.
“Access to credit remains a key issue for many businesses, and if we are to see the growth and jobs we need, Government must to act to fill gaps where specific market failures exist. Through the Action Plan for Jobs, we are delivering in 2012 a number of measures to fill these gaps and ensure that businesses do not face unnecessary obstacles as they attempt to expand and create the jobs we so badly need, including the €90million Microfinance Scheme, the €120million second call under Innovation Fund Ireland and the €150million Development Capital Scheme.
“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. These are the businesses we need to stimulate our jobs recovery, and with new supports like the Credit Guarantee Scheme I am determined to ensure that they can expand and create the employment we need”.