SMEs are defined by EU 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;
- are established and operating in the Republic of Ireland.
However, SMEs involved in primary agriculture, horticulture and fisheries are excluded from the existing scheme.
The new CGS aims to encourage additional SME lending by offering a partial government guarantee to banks against losses on qualifying loans granted to support business changes SMEs need to make in response to COVID-19.
The banks will be responsible for the other 20%. The guarantee can be used for a wide range of lending products such as term loans and performance bonds between €10,000 and €1 million that have a maximum term of six years or less.
It will be available to all SME sectors, including primary producers according to the government press release. Interest rates are stated to be below current market rates.
The PSRF will be deployed through a sub-portfolio within the Ireland Strategic Investment Fund ("ISIF") a sovereign development fund managed by the National Treasury Management Agency. It will focus on investing on a commercial basis in large and medium enterprises employing more than 250 employees, or with an annual turnover in excess of €50 million that have been negatively and materially impacted by the pandemic.
The PSRF investment will seek a risk adjusted return and will have the flexibility to invest across the capital structure in a range of instruments from equity to debt and hybrid instruments to allow businesses to access the required capital in the most appropriate form. Any investment made will need to yield a commercial and economic impact return in line with ISIF’s statutory requirements. All business sectors are eligible.
Applying for the Schemes
In parallel, the Department of Business, Enterprise and Innovation, the Department of Agriculture, Food and the Marine, the Departments of Finance and Public Expenditure and Reform, and the Strategic Banking Corporation of Ireland are working to put in place arrangements to ensure that the scheme is implemented as soon as the legislation is enacted.
If you would like further information, please liaise with your usual Maples Group contact or any of the contacts listed below.