First lender for new €1.2bn Ukraine Guarantee Scheme named

Bank of Ireland is the first lender to the market for the new €1.2bn Irish Government scheme for SMEs.

Bank of Ireland has been named as the first lender to the market for the Ukraine Guarantee Scheme.

Other lenders are expected to take part in the Scheme following the Open Call for participants which closed on Friday last.

“This scheme will provide additional support and financial flexibility for businesses suffering from rapidly rising costs as a consequence of Russia’s invasion of Ukraine”

This Scheme has a lending ceiling of €1.2bn and will facilitate loans for working capital and medium-term investment for businesses impacted by global events beyond their control.

Rising costs

Through the scheme businesses will have certainty that their liquidity funding needs can be met through low-cost loans supported by the Government. This is a central pillar of the Government’s response to aid businesses impacted by rapidly rising costs as a result of the invasion of Ukraine.

“The illegal invasion of Ukraine by Russia and its consequences has led to increased costs for business across numerous areas of their operations,” said the Minister for Enterprise, Trade and Employment Simon Coveney, TD.

“Many businesses need access to liquidity and this Credit Guarantee Scheme gives that. Low cost loans, favourable terms and pre-eligibility availability makes this Scheme attractive and accessible to businesses including SMEs, farmers and fishers.

“In the coming time I look forward to a number of other lenders and financial institutions participating in the Scheme. The Government will continue to assist businesses in the most practical, targeted and effective way as we continue to negotiate a challenging trading environment.”

In July 2022 the Minister for Enterprise, Trade and Employment informed Government that he was considering a credit guarantee scheme to provide liquidity support to businesses, as part of his Department’s response to the Ukraine crisis.

SMEs, small mid-caps and primary producers have an immediate and urgent need for liquidity to meet increased expenses, particularly energy costs, and adapt to volatile and altered economic trading conditions. A significant and ambitious credit guarantee scheme will assist lenders in providing liquidity to these companies and send a strong signal of support and confidence.

To give a legislative basis to such a scheme, an amendment to the Credit Guarantee Act 2012 (as Amended) was required, and Government permission to draft these amendments was received on 22 July 2022. The Credit Guarantee (Amendment) Bill 2022 was signed into law by the President on 2nd December 2022.

“Bank of Ireland is delighted to be the first bank to offer the Ukraine Credit Guarantee Scheme to Irish businesses, farmers and fishers,” said the CEO of Bank of Ireland, Myles O’Grady said.

“The bank is here to support our Irish business customers through turbulent times as it has always done throughout its 240-year history. This scheme will provide additional support and financial flexibility for businesses suffering from rapidly rising costs as a consequence of Russia’s invasion of Ukraine.”

June Butler, CEO of the Strategic Banking Corporation of Ireland (SBCI) added: “Supporting Irish businesses in accessing lower-cost funding, when needed the most, is a priority for the SBCI. I welcome the introduction of the Ukraine Credit Guarantee Scheme to market, which will go a long way in helping businesses to deal with the sharp increase in costs, including energy costs, due to the ongoing war in Ukraine. 

“We believe that businesses, including farmers and fishers, will benefit from having access to this additional financial support, to fund their working capital and investment needs. The provision of unsecured loans of up to €250,000, together with the reduction in applicable interest rates, makes the Scheme a viable option for borrowers. The SBCI will continue to play its part in supporting Irish businesses as they seek to access finance to grow, innovate and prosper into the future.”

Main features of the Ukraine Credit Guarantee Scheme

The main features are as follows:

  • This is a scheme for SMEs, primary producers and small mid-caps (defined as businesses with up to 499 employees). SMEs are expected to be the main beneficiaries.
  • In order to qualify for the Scheme, the borrower will have to declare that 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 Ukraine crisis.
  • Loans will be available to viable businesses only and it must be a new loan with no refinancing.
  • The ceiling of funding available under the UCGS is €1.2 billion.
  • A guarantee rate of 80% for the State with the lenders retaining 20% of the risk of the loan.
  • The current standard facility size of €10k to €1 million under the current Acts will remain for the UCGS.
  • The products covered under the Scheme will include a broad range of credit facilities including overdrafts, working capital and term loan facilities. 
  • Capital and/or interest moratoria for specific periods of time (up to three months) will be permitted under the Scheme but any decision regarding such moratoria will be at the discretion of the individual lender based on their assessment of their customer. 
  • The new Scheme has been prepared in order to comply with the terms of the European Commission’s Temporary Crisis Framework for State Aid. In particular:
  • Primary agricultural, fisheries and aquaculture producers may be included.
  • A guarantee premium on each loan under the Scheme is required to be paid in addition to interest rate costs. The premia range for SMEs is 0.29% for loans of 1-3 years and 0.68% for 4-6 years. For small mid-caps the range is 0.73% for 1-3 years and 1.55% for 4-6 years.
  • The scheme will be timebound and will be available until 31 December 2024.