- “Bizfin.ie” a business lending website is being launched to help local sole-traders & businesses access to credit
- Plumbers, electricians and other sole traders impacted by COVID expected to utilise low-cost loans of €10,000 to €400,000 in some credit unions.
- Credit unions set to meet face-to-face with all business members to deliver rapid lending decisions
The Credit Union Development Association [CUDA], which commenced its Small Business Lending initiative early 2020, announced today that 4 of its largest credit unions (Capital Credit Union, Credit Union Plus, Blanchardstown & District Credit Union and Dundalk Credit Union) with a combined membership of circa 200,000 are now successfully partnering with Government in the low-cost COVID-19 Credit Guarantee Scheme. The representative body believes that credit unions will succeed in working with micro, small & medium sized businesses, impacted by COVID-19, to review their cash-flow and working capital requirements to enable these businesses to survive, protect jobs, create future employment and thrive in 2021.
The Scheme offers an 80% Government guarantee to participating lenders to provide Irish businesses with access to low interest loans as they respond to the impacts of COVID-19, but take-up has been low for a variety of reasons. Credit Unions believe that some SME’s have been reluctant to take on further debt in this uncertain economy. CUDA acknowledge that credit unions, who were again voted most trusted organisation in 2020 are seen to be more involved in their local communities, a consequence of which is more local business people will be willing to sit down and discuss the merit of them participating in this scheme.
The Tánaiste and Minister for Enterprise, Trade and Employment, Leo Varadkar T.D. today announced the participation of one the largest Credit Union associations in Ireland, the Credit Union Development Association (CUDA) in the Government’s COVID-19 Credit Guarantee Scheme.
The Tánaiste said:
“Irish SMEs will now be able to borrow from Credit Unions under the €2bn Covid Guarantee Scheme. These new providers, from the Credit Union Development Association, have a wide geographical range, from Blanchardstown to Navan.
“Credit Unions are at the very centre of communities across the country. They have an excellent reputation in their local areas and understand the needs of their customers. Their inclusion will help further diversify the options available to small business under this Scheme.”
Minister of State at the Department of Finance, Séan Fleming said,
“I welcome today’s announcement that further credit unions, supported by the Credit Union Development Association (CUDA), will be participating in the COVID-19 Credit Guarantee Scheme, bringing the total number of credit unions in the scheme to nineteen. With their unrivalled local knowledge, credit unions are ideally placed to support the recovery and providing loans to local businesses is a key element of the recovery. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book.”
Minister for Agriculture, Food and the Marine Charlie McConalogue TD said,
“I am delighted with the addition of credit unions to the COVID-19 Credit Guarantee Scheme. As well as providing a greater choice of lenders for farmers, fishers and food businesses, it will benefit rural communities, which continue to be well-served by the credit union movement. At this time of economic disruption, access to finance is critical to ensuring the ongoing viability of businesses, including those in the agri-food sector and I am pleased that my Department is supporting this initiative.”
The scheme is operated by the SBCI and delivered through the participating finance providers, allowing affected businesses to access additional financing through traditional lenders. 19 Credit Unions with multiple outlets are now participating finance providers in the COVID Credit Guarantee Scheme.
Kevin Johnson, CEO of CUDA commented, “
“As the trusted provider of financial services in communities throughout Ireland, we believe that many sole-traders and small business owners will feel more comfortable dealing with credit unions, particularly where they can receive a fast answer to their credit application. Many of these solid businesses are struggling due to COVID-19 and are now at a point where they need to review their cashflow and credit lines to ensure they are well positioned for a return to more normal business volumes in the second half of 2021.
We have designed the standalone business website, Bizfin.ie, to support this initiative which will be accessible to all business customers of the participating credit unions. They will be able to apply for business loans as well as apply for credit union membership via this site.”
About COVID-19 Credit Guarantee Scheme
The scheme, made available by the Department of Business, Enterprise, Trade & Employment is to support the economic recovery and interested parties can find further information on the COVID-19 Credit Guarantee Scheme here. Businesses will be required to make two declarations, i] that their turnover or projected turnover has been reduced by 15% as a result of COVID-19 and ii] that it has a reasonable prospect of returning to viability post Covid-19. The scheme can provide liquidity finance. It is situated between the shorter term COVID-19 Working Capital scheme and the long-term Future Growth Loan Scheme being offered by the Government.
Businesses need not previously have been clients of a participating provider to apply for lending from those providers. Loans of up to €1 million are available for up to 5.5 years. No personal guarantees or collateral is required for loans under €250,000. All loans have reduced interest rates demonstrated in the agreement documents with the participating enterprise.
The scheme will be available until the end of June 2021, or until it is fully subscribed.
The COVID-19 Credit Guarantee Scheme operates under the State Aid Temporary Framework introduced in response to the pandemic.
Participating Credit Unions have signed legal agreements whereby the maximum individual loan is set by the Credit Guarantee Amendment Act 2020 and in turn the European Commission State Aid Temporary Framework (Section 25D). This results in the maximum loan been calculated as:
- double the annual wage bill of the participating enterprise for 2019, or for the last year available
- 25% of the participating enterprises’ total turnover in 2019; or
- in limited cases and with appropriate justification, the amount of the finance agreement may be increased to cover the liquidity needs from the moment of granting for the coming 18 months for SMEs.
The Credit Union Development Association was legally incorporated in 2003. In its early days it was the representative voice, on behalf of its owner member credit unions, with legislators and regulators. It has since evolved and now, as well as providing a ‘voice’, it is increasingly providing support facilities in the areas of regulatory compliance, shared services for business supports and digital solutions, as well as providing training & development. CUDA is a credit union owned network that enables member credit unions to engage in beneficial activities which would not have proved possible to do as single stand-alone entities. https://www.cuda.ie/
The Business Lending Product being launched in participating CUDA member credit unions was based on their strong desire to to serve another segment of the credit union membership, namely micro, small & medium sized enterprises. CUDA have recruited the necessary expertise and established a Business Lending Framework, incorporating Risk Appetite & Business Lending Policy Rules. This is to ensure a consistent and comprehensive assessment within the credit unions. There is also centralised shared resource available that provides ongoing support on credit assessment, support & expert guidance to assist and give real time advice to the Business Lenders in participating credit unions. For more information visit BizFin.ie.