Small and medium-sized enterprises (SMEs) could benefit from a recent relaxation by the European Commission of State aid rules in response to the current credit squeeze. To date, the Irish government has not submitted any schemes for approval under the temporary framework. However, many other Member States have, including France and Germany.
Under the new temporary framework, valid until the end of 2010, Member States may grant the following types of State aid:
- Lump sum aid of up to €500,000 per company for the next two years;
- State guarantees for loans at a reduced rate premium (with reductions of up to 25% for SMEs on the annual premium for new guarantees). The guaranteed amount may be up to 90% of the loan;
- Aid in the form of subsidised interest rates, in particular for investment loans to finance the production of new green products; and
- Risk capital aid of €2.5 million per SME per year where the percentage of minimum private investor participation is at least 30%.
The measures aim to unblock bank lending to companies, particularly SMEs, by ensuring access to finance and encouraging continued investment in a low-carbon future. Companies which were not already in difficulty on 1 July 2008 and who face a shortage or the unavailability of credit due to the crisis can benefit from the new measures.
The European Commission will approve schemes that comply with the temporary framework. When seeking approval, Member States must show that the temporary measures proposed are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the Member State. Once schemes are approved, aid given under the schemes will not require individual clearance. The normal State aid rules continue to apply subject to the existing exemptions, for example the general block exemptions and the rules on de minimis aid.
The temporary measures will expire on 31 December 2010 when the Commission expects financial markets to have stabilised.
