September 14, 2020

by Addison Davies

COVID19 pandemic has hit the global economy. Even the most robust economies are shattered after the outbreak of coronavirus. Some businesses are lucky that they can ride out the impact of the pandemic. However, most of the businesses have shut down.

When the pandemic was in the beginning phase, the government put the country under the lockdown. Of course, when this invisible threat appeared, nobody had an idea to deal with it. The only way to contain the spread of the virus was isolated from the crowd. Now the priority has changed.

No economy can wait for the development of vaccination to lift the lockdown. Therefore, the Ireland government decided to introduce a credit guarantee scheme to boost the economy. COVID19 worst-hit small and medium enterprises. These businesses include a large number of people involved in fishing and farming sectors. According to the latest scheme introduced by the Ireland government, small-medium enterprises can borrow between €10,000 and €1 million. This is the first time the Ireland government has introduced this scheme.

This scheme aims to make loans available to small-medium enterprises affected by the pandemic at a low cost. This is the most massive loan scheme declared in the history intending to supply funds to small and medium businesses to boost the economy. However, according to the scheme, enterprises will have to prove that their companies have suffered from the pandemic. Loans are available under this scheme until the end of this year, and the state backs 80% of them.

Finance providers will make sure that entrepreneurs access to funds they need during this time.

Some enterprises have expressed their concerns that it would be challenging to pay back this much amount. Taking on too much debt would push them in a debt trap. Under this state-backed loan guarantee scheme, all enterprises would get funds according to their needs during the pandemic time. It is not going to be like that you apply for the loan under this scheme and you get funds straight away.

Apart from monitoring whether your business suffered due to the outbreak of the virus, your needs will also be evaluated. It is essential to make sure that you are applying for a loan as per your financial needs, so you do not fall into a debt cycle. If you are seeking to borrow money under this scheme, you can get funds from finance providers – AIB, Bank of Ireland and Ulster Bank. However, the government is planning to add others. If you take out the loan under this scheme:

  • You will have to prove that your business turnover has plummeted by 15% during the pandemic time.
  • The amount will be repayable over a maximum period of six years.
  • The rate of interest will vary from individual to individual, depending on the term of the loan. However, it will be lower than the market rates.
  • You cannot borrow less than €10,000 and over €1 million.
  • You are not required to be a previous client of the finance provider.

Some enterprises have argued that varying interest rates could indicate that you will end up getting such term loans at high-interest rates in case you have a record of bad credit loans in Ireland. Note that you will get these loans at lower interest rates regardless of your credit rating.

What are financial providers doing currently?

Having said that the scheme is available until December 2020 and the government aims to encourage small and medium enterprises to borrow money to push the growth of their businesses, AIB is going to launch a campaign to spread awareness in public about the scheme. It is going to contribute €400,000 to the marketing campaign. According to Ulster Bank, loan below or equal to €250,000 will be charged at a rate of 3.48% and those over €250,000 at a rate of 2.48%.

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