Business Plus

Small Firms Buoyed By State-Backed Loans

Schemes offering low-interest credit have bolstered the resilience of many businesses­es. Robert O’Brien looks at the two new schemes currently in operation


The past year has seen a marked slowdown in Ireland’s economy, though it is coming off a high base. After the Covid lockdowns in 2020, the economy rebounded very strongly in the following two years. Modified Domestic Demand (MDD) — an economic measure that reflects activity in Ireland’s domestic economy — increased by 5.8% in 2021 and 9.5% in 2022. For 2023 the expected MDD growth outcome is 2.2%, with the same again forecast for 2024.

This ongoing growth is reflected in the relatively low level of business insolvenci­es, which for 2023 are tracking below the 2019 pre-Covid level. Tax debt warehousin­g is an important reason for this company resilience, and so too are the various state-backed loan schemes that made borrowing easier for sole traders, small firms and larger SMEs.

These loan schemes span the Future


Growth Loan Scheme Covid-19 Credit Guarantee Scheme Brexit Impact Loan

in 2019), the

(launched in 2020), and the

Scheme (launched in 2021). Between them these three schemes facilitate­d €1,760m in loans and other types of finance to 15,200 enterprise­s.

Digging into the data shows these schemes reach into all sectors of the economy. For instance, with the Credit Guarantee Scheme 3,200 of the borrowers were sole traders, many of them farmers, with average borrowing of €36,000. Across the three schemes, 11,570 of the borrowers were micro enterprise­s, defined as having under ten people employed or balance sheet value less than €2m. The average loan or finance amount drawn down by these micro firms was €76,000.

Small firms like these state-backed schemes because there is no personal guarantee required and the interest rates are low. For over 90% of the Credit Guarantee Scheme borrowers, the interest rate is 2.5% to 3.0%.

Two new state-backed lending schemes are currently in operation. The

Ukraine Credit Guarantee Scheme

has €1.2bn to disburse while the more recent

Growth and Sustainabi­lity Loan Scheme

(GSLS) is making €500m available to on-lenders.

With the Ukraine scheme, borrowers have to declare costs have increased by a minimum of 10% on their 2020 figures, and that the loan is being sought specifical­ly as a result of difficulti­es being experience­d due to the crisis.

The GSLS covers unsecured loans of €25,000 upwards for terms of up to ten years for borrowers investing in the growth and resilience of their business, and/or contributi­ng to climate action and environmen­tal sustainabi­lity.

The scheme is targeting a minimum of 30% of the lending volume for environmen­tal sustainabi­lity purposes, with the aim of encouragin­g SMEs to take positive actions in support of the climate change agenda. Green loans will also benefit from an additional interest rate discount.

Both schemes are organised by Strategic Banking Corporatio­n of Ireland. Bank of Ireland, the first GSLS on-lender, has prioritise­d environmen­tal sustainabi­lity loan applicatio­ns, with loans for general long-term investment under the second phase being processed from December 2023.

The GSLS is open for a broad range of investment­s that can qualify for eligibilit­y as investment in green/ sustainabl­e measures. These include: Building upgrades and renovation­s Roof and wall insulation Replacemen­t windows Replacemen­t of existing lighting with energy efficient LEDs Electric vehicles and, electric vehicle charging points Manufactur­ing of energy-efficient equipment Manufactur­ing of renewable energy equipment

Minimum tillage equipment Tractor and harvester replacemen­t Agricultur­e building renovation or upgrade.


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