Minister for Economic Services Prof. Josef Bonnici today during a Press
Conference launched the new Enterprise Loan Guarantee that is being
offered by the Institute for the Promotion of Small Enterprises (IPSE).
Minister Bonnici remarked that this is the second important scheme
launched by the Institute in less than a week’s time after last week
IPSE together with MDC had launched the Technology Venture Fund.
IPSE has today signed an agreement with Bank of Valletta and HSBC
Bank Malta for the operation of the New Enterprise Loan Guarantee (NELG).
As a result of this agreement IPSE will be in a position to offer a
guarantee of up to 80% of the value of a loan required by first time
entrepreneurs willing to start a business.
The two local banks appreciate the effort required by first time
entrepreneurs to set up a business venture. Through this agreement, Bank
of Valletta and HSBC will charge an interest rate of 1.75% over base
rate (as stipulated by the Central Bank of Malta) for the total amount
of the assisted loan.
Minister Bonnici explained that the guarantees will be supported by
the Credit Guarantee Fund (CGF). This LM5 million fund was set up by
IPSE from the money made available by the Maltese Government in support
of the Programmes of Assistance aimed at the restructuring of the
manufacturing sector, and the establishment and growth of innovative
SMEs.
Economic Services Minister, Prof. Bonnici added that experience in
other countries has shown the effectiveness of loan guarantees in
facilitating access to finance required by small and restructuring
enterprises. IPSE’s loan guarantees are used to help raise the finance
required for both the procurement of fixed assets and additional working
capital required to implement a business and/ or a restructuring plan
IPSE would agree to support. To date, IPSE has provided guarantees to
clients enabling them to raise over LM2 million of loans from local
banks.
Out of the Lm5 million fund, the sum of Lm1.5 was set aside for The
New Enterprise Loan Guarantee. The two other products that are currently
available under the Credit Guarantee Fund are the Standard Loan
Guarantee (SLG) and the Contract Network Guarantee (CNG).
The Standard Loan Guarantee – offers access to a loan Guarantee
of up to 50% of a loan required to implement business plans across
IPSE’s programmes of assistance. In addition, IPSE also offers an
interest subsidy on the guaranteed loan that is equivalent to 50% of
the interest due on the guaranteed sum.
The Contract Network Guarantee – offers a guarantee of up to 1/3
of the contractual obligations with third parties entered
collectively by at least two of its clients so as to enable them to
undertake significant contract work.
The CGF is a vital tool in the portfolio of assistance administered
by IPSE in assisting clients to access the finance required to implement
the Business Plans that IPSE agrees to support. Enterprises in their
start-up phase present financial institution with above average risk.
The New Enterprise Loan Guarantee goes a long way to alleviate the
situation by sharing the risks of a new business start-up.
In an increasingly competitive environment, increasing business risks
and tighter market opportunities, access to banking finance is an
increasingly complex issue, particularly for SMEs. Problems of access to
finance can in fact arise on both the enterprise side and the bank
itself.
IPSE will continue to upgrade its portfolio of products and services
in its efforts to support in the restructuring, formation and growth of
innovative business in Malta.
