Changes have been announced to the Credit Guarantee Scheme which will help more small and medium sized enterprises (SMEs) secure finance.

The scheme aims to help viable businesses which have been refused conventional bank credit facilities access a state-backed guarantee for 75% of their loan.

The two changes announced today will allow for refinancing loans where an SME's bank is exiting the Irish SME credit market, while the maximum length of the guarantee will be extended from three to seven years.

Up until now, the scheme was only available to businesses applying for new loans and was not available to companies who wished to move loans from a bank which is exiting the Irish market.

Since it was set up in 2012, about 156 businesses have availed of the scheme to date with loans of approximately €20m backed by the guarantee.

"Thousands of people in the SME community have been affected by the exit of some foreign banks from the business credit market here," commented the Minister for Business and Employment, Ged Nash, as he announced the changes. 

"One of the impacts of the economic recession is that many of these small businesses who have managed to survive and keep people in jobs are now under-capitalised".

"The problem arises when these SMEs seek refinancing loans, often with relatively short timeframes, and are not able to meet the minimum stake requirements of the remaining banks," he explained. 

"The changes to the Credit Guarantee Scheme I am announcing today mean they will be able to access this State Guarantee and this will greatly assist them in getting refinancing loans from the remaining banks," he added.  

ISME welcomed the changes to the Credit Guarantee Scheme. It noted that the take-up of the scheme to date has been "abysmal" so these changes are very welcome. 

"We are aware of businesses who have been struggling to refinance loans from the exiting banks and had informed Government of this", he said.

"We are pleased that the relaunched scheme addresses this issue by making the guarantee available to businesses in this situation. The extension of the length of the guarantee, from three to seven years, is also a positive development," said ISME's CEO Mark Fielding. 

Chambers Ireland also welcomed the changes and said the scheme has not had the desired effect so far. 

"The inclusion of refinancing loans where an SME's bank is exiting the market will open this product up to more businesses and will provide a source of support to otherwise viable companies who have struggled to secure the finance necessary to continue to trade," Chambers' Director of Policy and Communications, Mark O'Mahoney, said. 

He also said the improved time frame will allow for greater flexibility and better reflects the realities of today’s economy.