IPSE launches new Enterprise Loan Guarantee

With a view to the increasingly competitive market environment, increasing business risks and tighter market opportunities, the Institute for the Promotion of Small Enterprises yesterday launched a new Enterprise Loan guarantee grant start ups better access to banking finance, which has become an increasingly complex issue for Malta’s Small to Medium Size Enterprises.

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.

Economic Services Minister Josef Bonnici, launching initiative yesterday, remarked how this is the second important scheme launched by the Institute in less than a week. Yesterday’s launch follows the IPSE/Malta Development Corporation launch of the Technology Venture Fund.

The two local banks appreciate the effort required by first time entrepreneurs to set up a business venture and through the agreement, both Bank of Valletta and HSBC will charge an interest rate of 1.75 per cent over the base rate, as stipulated by the Central Bank of Malta, for the total amount of the assisted loan.

Profs. 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.

Minister 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 currently available under the Credi 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, meanwhile, 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.

IPSE said yesterday it would 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.