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Credit guarantee bill welcomed

The scheme, which provides credit to job-creating SMEs struggling to get finance, was welcomed by a number of groups and described as “long-awaited” and good for small businesses.

Fine Gael Minister for Jobs, Enterprise and Innovation, Mr Richard Bruton
Fine Gael Minister for Jobs, Enterprise and Innovation, Mr Richard Bruton
Image: Sasko Lazarov/Photocall Ireland

MINISTER RICHARD BRUTON’S “long-awaited” credit guarantee bill has been welcomed by a number of groups – though one warned it had to be monitored properly.

The Minister for Jobs, Enterprise and Innovation published the Credit Guarantee Bill yesterday and also announced the appointment of an operator for the Temporary Partial Guarantee Scheme. This marks the delivery of one of the key commitments under the Action Plan for Jobs 2012.

The Minister said the 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:  where businesses have insufficient collateral, and where businesses operate in sectors with which the banks are not familiar. It provides a 75 per cent State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential.

For every €150million of additional lending, the scheme is expected to benefit over 1800 businesses, and the cost of the scheme per €150million of lending is €6.38million. When increased tax receipts and decreased social welfare payments are taken into account, the net gain to the Exchequer is over €25million per €150million of lending, said the Minister.

The bill will provide for the establishment of a targeted Temporary Partial Credit Guarantee Scheme, when enacted.

Minister Bruton also announced that he has awarded a contract for the management and operation of the Guarantee Scheme to Maynooth-based company Capita Asset Services.

Chambers Ireland’s Deputy Chief Executive, Sean Murphy, said that 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.

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The Institute of Certified Public Accountants in Ireland’s President, Gail McEvoy, said that the scheme will be a “very necessary lifeline” to many viable small businesses.

ISME described it as “overdue” and said that the Government:

needs to be vigilant to ensure that the banks do not use this guarantee as a substitute for loans that should have been made without the scheme.

Fianna Fail also welcomed the “long-awaited” legislation and Deputy John McGuinness TD urged Minister Bruton to progress the €100 million Micro Finance Loan Scheme, which has not been published.

Read: Irish SMEs are ‘stuck in the 20th century’>

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