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The Brexit Loan Scheme- Accessing Capital in the face of Brexit

10 October, 2019 Author: Ciara Finnan

The Brexit Loan Scheme (the “Scheme”) was launched on 28 March 2018 and aims to support small and medium sized businesses who are facing particular challenges as a result of the UK leaving the European Union.

The Scheme provides access to between €25,000 and €1.5 million for a term of 1 to 3 years, at a lower interest rate and on more favourable terms than those provided by other Irish lenders in the market. It is important to note that the Scheme is only available until 31 March 2020 and therefore, companies wishing to apply for a loan under the Scheme should take action as soon as possible.

The below is a list of companies who are eligible to apply under the Scheme (an “Eligible Company”):

• viable small businesses with fewer than 50 employees with an annual turnover and/or balance sheet total not exceeding €10 million;
• viable medium businesses with between 50 and 249 employees with an annual turnover not exceeding €50 million and/or a balance sheet total not exceeding €43 million; and
• small Mid-Cap businesses which are businesses with between 250 and 499 employees.

Businesses applying for the Scheme must be impacted by Brexit. The Scheme differs from the Future Growth Loan Scheme in that businesses involved in the primary agriculture and/or aquaculture sectors cannot apply. However, as the Department of Agriculture, Food and the Marine has contributed to the Scheme, 40% of the Scheme’s fund will be available to food businesses.
Certain businesses will not qualify for the Scheme, including businesses that are bankrupt or in liquidation. Businesses in financial difficulty will not qualify as an Eligible Company, unless they can show that their financial difficulty is directly linked to the impact of the UK leaving the European Union.

The Scheme is designed to provide an Eligible Company with loans for a term of between 1 to 3 years in the amount of between €25,000 and €1.5 million with a maximum interest rate of 4%. It should be noted that the loan amount and the term is highly variable and is dependent on the purpose of the loan. The Scheme offers optional interest only repayments for a period at the beginning of the term of the loan. Furthermore, as with the Future Growth Loan Scheme, loans to the value of up to €500,000 may be unsecured.

Loans granted under the Scheme must be used for the working capital of the business and to fund innovation, change or adaptation of the business to mitigate the impact of Brexit.

A business must satisfy one of the ‘Brexit criteria’ and one of the ‘innovation criteria’ in order to qualify as an Eligible Company.

The Brexit Criteria

In order to satisfy the Brexit criteria, small or medium sized businesses must show that there is a certain level of exposure to their business, due to the UK leaving the EU. As such, the business must show that it either imports or exports products from/to the UK which comprises at least 15% of the business’ turnover.

A business will also satisfy the Brexit criteria if it can show that the business is indirectly exposed to the UK as it deals directly through another enterprise that is directly exposed to the UK.

For the avoidance of doubt, reference to the UK includes Northern Ireland and therefore may have a particular impact on businesses around the border between the Republic of Ireland and Northern Ireland.

The Innovation Criteria

The innovation criteria are much broader than the Brexit criteria. There is a particular emphasis on research and innovation and the possibility of bringing a new product to a market or to a new geographical market. The criteria differ depending on the size of the business and the business’ annual spend on research and innovation costs. As such, it is worth reviewing all 11 of the innovation criteria which are set out on the Strategic Banking Corporation of Ireland (the “SBCI”) website here.

The Scheme is operated by the SBCI through three participating lenders, AIB, Bank of Ireland and Ulster Bank. The application process is a two stage process. First, applicants will be assessed for eligibility through the SBCI website (a link to which is provided above) and if successful, the applicant will be issued with an eligibility reference number. The applicant must then apply for the loan with one of the participating finance providers using the eligibility reference number.

It should be noted that when applying for a loan under the Scheme, a business plan will be required for consideration. Documentation will also be required evidencing that the business meets one of the innovation criteria. Further information and guidance on preparing the business plan, in addition to a template can be found on the Department of Business, Enterprise and Innovation website here

Should you have any queries arising out of the foregoing, or any other queries relating to your business, please contact either of the undersigned who will be happy to assist.

Ciara graduated from Dublin City University in 2015 with an honours degree in Economics, Politics and Law, specialising in Law. Ciara has worked in other large commercial firms in the financial institution department….

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John graduated with an Honours BCL law degree from University College Dublin in 1994 and was admitted as a solicitor in Ireland in 1997. He has also diplomas in European Law from the Universite des Sciences Sociales, Toulouse and the University of Amsterdam….

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