Government loan program receives boost from non-bank lenders

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The Covid Credit Guarantee Scheme (CGS) had three of its biggest lending weeks starting in February, a sign that the addition of several non-bank lenders as distributors of state-backed finance earlier this year could bear fruit.

he € 2 billion program, which offers SMEs an 80% state guarantee on short and medium-term loans of up to € 1 million, recorded its second weekly volume of loans since its launch on February 25, according to the Ministry of Enterprise, Trade and Employment.

The fund has supported nearly 17 million euros in loans to 184 companies this week – double the average since its launch in September 2020. The two weeks on either side of this peak were around 12 million, respectively. euros and 13 million euros – well above the half-yearly average of 9.2 million euros per week.

The increase in lending volume follows the addition in mid-January of 19 credit unions and four non-bank lenders alongside AIB, Bank of Ireland and Ulster Bank as “On-lenders” for the subsidized money.

One of the non-bank lenders, peer-to-peer finance company Linked Finance, granted € 3m in loans in its first month of operation under the program, touting its time frame for lending decisions. 24 hours as a key factor.

Since its launch in September, CGS has struggled to gain traction in the market, despite difficult credit conditions for SMEs.

By the end of February, less than 10% of available funding had been committed and it was on track to support around 350 million euros in new loans by the time it expires on June 30.

If current volume trends continue, however, that number could approach € 500 million.

Last week, the acting CEO of the Strategic Banking Corporation of Ireland (SBCI), which manages the CGS, told the Public Accounts Committee that the € 2 billion capacity was available if needed and was a “statement of ‘important intention’.

“We are aware of some public comments asking why SMEs have not used more of the capacity available under this program,” Ian Black, SBCI interim CEO, said in a March 9 statement to the Committee. public accounts.

“It’s not a benchmark or deployment target; it’s there if SMEs need it. Based on our experience with tens of thousands of SMEs, we have found that the decision to take out additional loans is rarely taken lightly. “

Mr Black indicated in his presentation to PAC that the CGS is likely to be extended until the end of the year, in line with a European Commission proposal to extend the state aid framework by six months. as part of Covid.

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