The Covid-19 Credit Guarantee Scheme
SMEs play a vital role in our local community, creating employment and stimulating economic activity. Many SMEs have been hit hard by the Covid 19 pandemic and may need support with working capital or term loans.
North Midlands Credit Union is proud to be amongst a small group of credit unions to participate in the Covid-19 Credit Guarantee Scheme, enabling us to assist local businesses, including Primary Producers, impacted by Covid-19 to access credit.
The Covid-19 Credit Guarantee Scheme (the “Scheme”) is provided by the Government of Ireland to facilitate lending to businesses adversely impacted by Covid-19. North Midlands Credit Union’s participation in the Covid-19 Credit Guarantee Scheme enables us to facilitate the provision of liquidity and working capital to local businesses through term and working capital loans.
- Loans from €10,000 to a maximum of €250,000 per borrower, subject to Loan Amount Criteria*,
- Terms of between 3 months up to 5.5 years.
- Loans will be available up to end of June 2021
- Loan Purpose:
- Working capital or investment
- The Scheme will also permit the refinance and roll-over of debt incurred as a result of Covid-19: e.g. Covid-19 related expenses that were initially funded through short term/temporary facilities such as overdrafts.
- No security will be required for loans up to €250,000.
*Loan Amounts Criteria:
The amount of credit that can be obtained by a borrower under the Scheme (whether under one or more finance agreements) is subject to the Scheme rules and the Temporary Framework. The maximum amount of the credit that is permitted to be advanced to a borrower under the Scheme cannot exceed €1m, and will be determined by one of the following three criteria:
- double the borrower’s annual wage bill for 2019, or for the last year available. In the case of a borrower created on or after 1 January 2019, the maximum loan must not exceed the estimated annual wage bill for the first two years in operation.
- 25% of the borrower’s total turnover in 2019.
- in limited cases and with appropriate justification, the amount of the loan may be increased to cover the liquidity needs of the borrower from the moment of granting for the coming 18 months for SMEs.
- You will need to provide certain documents to the credit union as part of this application process to determine and evidence the maximum credit amount which you are entitled to apply for. These requirements vary, but are likely to include: – Management/Audited accounts/Business Plan.
Viable micro, small and medium-sized enterprises (SMEs) and primary producers that meet the eligibility criteria and have or expect to have a reduction of minimum 15% in their turnover or profitability as a result of Covid-19. SMEs are defined by the Standard EU definition [Commission Regulation 2003/361/EC] as enterprises that:
- have fewer than 250 employees
- have a turnover of €50 million or less (or €43 million or less on their balance sheet)
- are independent and autonomous i.e. not part of a wider group of enterprises
- have less than 25% of their capital held by public bodies
- is established and operating in the Republic of Ireland
Businesses that cannot apply for this product include those that:
- were already in financial difficulty prior to 31/12/2019*
- are bankrupt or being wound up or having its affairs administered by court
- in the last five years have entered into an arrangement with creditors, in the context of being bankrupt or wound-up or having its affairs administered by the courts
- are convicted of an offence concerning professional misconduct by judgement, fraud, corruption, involvement in a criminal organisation, money laundering or any other illegal activity where such illegal activity is detrimental to the European Union’s financial interests
*The guarantee may not be granted to undertakings that were already in difficulty (within the meaning of the General Block Exemption Regulation) on 31 December 2019: In derogation to the foregoing, aid can be granted to micro or small enterprises (within the meaning of Annex I of the General Block Exemption Regulation) that were already in difficulty on 31 December 2019 provided that they are not subject to collective insolvency procedure under national law, and that they have not received rescue aid or restructuring aid.
The interest rate applicable to the loan is 4.25%. (APR 4.33%)
A loan of €25,000 over 5 years (60 months),will have 60 monthly repayments of €463.25 per month. Total Cost of credit would be €2,790.49 and the Total Amount to be repaid would be €27,790.49.
Covid-19 Credit Guarantee Scheme Premium**
The borrower contributes to the cost of the Scheme by paying a guarantee premium on loans advanced. This premium is payable in addition to loan repayments. It represents the cost to the government of providing the 80% guarantee to participating lenders.
The premium will be collected in line with the repayment terms of the loan and is payable to the credit union who will in turn pass it on to the Department of Enterprise, Trade and Employment.
The premium rate that will apply will depend on the size of the business and the length of time for which the credit is being advanced. Please see below an overview of the rates which will be applicable to SMEs
|Duration of Facility||1 year||2 year||3 year||4 year||5 year||5.5 years|
Example of Premium payable – a loan of €20,000 over 36 months will have a Premium of 0.29% applied. The cost of this Premium over the life of the loan will be €86.63.
- Refinance of debt incurred pre the Covid-19 pandemic.
- Finance of pure real estate development activity.
- Hemp production other than for fibre is an ineligible activity.
North Midlands Credit Union will make a credit decision to approve or decline your Covid-19 CGS credit application based on our agreed local credit policies and scheme conditions. If declined, you have the option of using the North Midlands Credit Union internal appeals mechanism.
The Covid-19 Credit Guarantee Scheme has been notified to the European Commission on the basis that the credit to be provided falls within the parameters set down in the Temporary State Aid Framework.
Loans are subject to approval. Normal lending terms and conditions apply.
As well as completing the relevant application forms, you will need to provide the audited or certified accounts or latest management accounts of your business. In certain cases, relevant current account statements may be required.