Regulation

SBCI Future Growth Loan Scheme

Summary of State aid rules applicable to FGLS

The SBCI currently sources its funds from the Ireland Strategic Investment Fund (ISIF), the European Investment Bank (EIB), the Council of Europe Development Bank (CEB) and the National Treasury Management Agency (NTMA). The Minister for Finance has provided a guarantee in respect of borrowings of the SBCI therefore funds it lends or obligations it guarantees can give rise to State aid and must comply with EU law governing State aid.

State aid can occur whenever State resources are provided selectively to undertakings engaged in economic activity, which confer an advantage over other undertakings. Generally, State aid is incompatible with the EC Treaty. However, the EC Treaty leaves room for a number of policy objectives for which State aid can be considered compatible.

The FGLS is offered under:

  1. The De Minimis Aid exemption 
  2. Article 14 Agriculture Block Exemption Regulation
  3. Article 17 Agriculture Block Exemption Regulation 
  4. Article 17 General Block Exemption Regulation
  5. Article 29 General Block Exemption Regulation


De Minimis Aid exemption under Commission Regulation (EU) No 1407/2013 of 18 December 2013 (“De Minimis Regulations”)

The European Commission has determined that State aid given to undertakings which comply with the De Minimis Regulations has a negligible impact on trade and competition. State aid which remains below a certain ceiling, depending on sector, and otherwise complies with the De Minimis Regulations (de minimis aid) is not subject to pre-clearance with the European Commission. The maximum amount of de minimis aid any single recipient can receive is €200,000 (gross grant equivalent) over a three year fiscal period. The total amount of de minimis aid given to a single recipient performing road freight transport for hire or reward cannot exceed €100,000 over a three year fiscal period. For loans, the amount of de minimis aid which is provided to a borrower (by means of a discounted interest rate) is calculated into its “gross grant equivalent” (based on the discount prevailing at the time the aid is granted)1. The de minimis aid is not equal to the total amount of the loan. Applicants for SBCI de minimis loans must be aware that such loans are provided to applicants subject to compliance with the De Minimis Regulations.

De minimis aid is cumulative. To ensure the relevant ceilings are not exceeded and the rules on cumulation are complied with, an applicant must declare any other de minimis aid covered by the Regulation or by other de minimis regulations it has received during the fiscal/calendar year concerned and the previous two years. It should be noted that a false declaration, resulting in State aid being granted in excess of the de minimis threshold, will require that excess aid needing to be recovered with interest. De minimis aid can be in the form of a grant, equity investment, guarantee or interest rate discount on a loan. De minimis aid could have been received from any State Agency, Government Department or Local Authority.

1The rate used is as specified in the Communication from the Commission on the revision of the method for setting the reference and discount rates (O) C 14, 19.1.2008, p. 6)

Examples of sources of de minimis State aid include:

  • Enterprise Ireland funding (e.g. Job Expansion Fund; Market Research Grant)

  • Department of Jobs, Enterprise and Innovation – Credit Guarantee Scheme

  • An Bord Bia funding

  • Local Enterprise Offices (LEO)

  • Environmental Protection Agency (EPA)

Exclusions

Please note the following activities are excluded from SBCI loans offered under the de minimis exemption:

  • Finance of specific export operations, or finance contingent upon the use of domestic over imported products. In particular, it should not apply to financing the establishment and operation of a distribution network in other States, or current expenditure linked to the export activity.

  • Finance of pure real estate development activity;

  • Finance of activities constituting pure financial transactions (e.g. purchase of shares);

  • Loans to undertakings in difficulty;

  • Finance of activities forbidden by national or EU law;

  • Primary agriculture (see specific SBCI FGLS Agriculture Loan product below).

  • Aid for the acquisition of road freight transport vehicles by undertakings performing road freight transport for hire or reward.

This is a summary of the State aid rules and applicants are advised to seek their own State aid advice and read the applicable provisions of the relevant Regulation. Please refer to Commission Regulation (EU) No 1407 2013 for full details on De Minimis State aid rules.



Agriculture Block Exemption Regulation Commission Regulation (EU) No 702/2014 (“ABER”)

Article 14 ABER

Loans for investment in tangible or intangible assets on agricultural holdings linked to primary agricultural production.

Where the loan is to support investments in tangible assets or intangible assets on agricultural holdings linked to primary agricultural production, the investment should pursue at least one of the following objectives:

  1. the improvement of the overall performance and sustainability of the agricultural holding;
  2. the improvement of the natural environment, hygiene conditions or animal welfare standards, provided the investment goes beyond EU standards;
  3. the creation and improvement of infrastructure related to the development, adaptation and modernisation of agriculture;
  4. the achievement of agri-environmental-climate objectives; and
  5. the restoration of production potential damaged by natural disasters, adverse climatic events, animal diseases, plant pests and the prevention of damages caused by those events.

Article 17 ABER

Aid for investment in tangible and intangible assets in connection with the processing and marketing of agricultural products.


Rules that apply to both Article 14 and 17 ABER

Eligible Costs and Aid intensity under Articles 14 and 17 ABER

The aid shall cover the following eligible costs:

  1. the construction, acquisition, including leasing, or improvement of immovable property;

  2. the purchase or lease purchase of machinery and equipment up to the market value of the asset;

  3. general costs linked to expenditure referred to in points (a) and (b), such as architect, engineer and consultation fees, fees relating to advice on environmental and economic sustainability, including feasibility studies; feasibility studies shall remain eligible expenditure even where, based on their results, no expenditure under in points (a) and (b) is incurred; and

  4. acquisition or development of computer software and acquisitions of patents, licenses, copyrights, trademarks.

The following costs are not eligible:

  1. costs, other than those referred to in paragraph (a) and (b) above, connected with leasing contracts, such as lessor’s margin, interest refinancing costs, overheads and insurance charges;

  2. working capital; and

  3. VAT (except where it is non-recoverable under Irish law).


The aid intensity or total aid resulting from a loan shall not exceed 40% of the amount of the eligible costs.

For the purposes of calculating aid intensity and eligible costs under this Scheme, all figures used shall be taken before any deduction of tax or other charge. The eligible costs shall be supported by documentary evidence which shall be clear, specific and contemporary.

Aid provided in the form of a discounted loan shall be discounted to its value at the moment it is granted. The eligible costs shall be discounted to their value at the moment the aid is granted. The interest rate to be used for discounting purposes shall be the discount rate applicable at the moment the aid is granted.

Exclusions under Article 14 and 17 ABER

The following activities are excluded from the FGLS:

  1. Loans to support export related activities towards third countries or other EU Member States, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to the other current expenditure linked to export activity;

  2. Loans contingent upon the use of domestic over imported goods;

  3. Loans to support investments required to comply with EU standards in force.

  4. Loans to an undertaking which is subject to an outstanding recovery order following a previous Commission Decision declaring an aid illegal and incompatible with the internal market;

  5. Loans to undertakings in difficulty;

  6. Loans to support the purchase of production rights, payment entitlements and annual plants;

  7. Loans to support the planting of annual plants (i.e. purchase of seed)

  8. Loans to support drainage works; and

  9. Loans to support the purchase of animals.

  10. Loans to acquire land

Maximum amount of aid payable under Articles 14 and 17 ABER

The maximum amounts of aid that may be generated through the form of discounted interest rates on loans supporting investment under the FGLS are:

  1. €500,000 per undertaking per investment project on agricultural holdings linked to primary agricultural production.

  2. €7.5 million per undertaking per investment project in connection with the processing of agricultural products and the marketing of agricultural products.

These limits shall not be circumvented by artificially splitting up an aid project.

This is a summary of the State aid rules and applicants are advised to seek their own state aid advice and read the applicable provisions of the relevant Regulation. Please refer to Commission Regulation (EU) No 702/2014 of 25 June 2014 for full details on ABER State aid rules.


General Block Exemption Regulation Commission Regulation (EU) No 651/2014 (“GBER”)

Article 17 GBER

FGLS loans that are offered under Article 17 must comply as follows:

The purpose of the loan is for investment in tangible or intangible assets of a business in one of the following categories:

  1. the setting up of a new establishment

  2. the extension of an existing establishment;

  3. diversification of the output of and establishment into new additional products;

  4. a fundamental change in the overall production process of an existing establishment; or

  5. the acquisition of the assets belonging to an establishment where 1) the business has closed or would have closed had it not been purchased; 2) the assets are purchased by third parties third parties unrelated to the buyer, and 3) the transaction takes place under market conditions.

Exception to requirement in 5. Where a member of family of the original owner or an employee take over a small enterprise (less than 50 employees and turnover and/or balance sheet not exceeding €10m) the sole acquisition of shares does not constitute investment.


Eligible Costs

The eligible costs shall be either or both of the following:

  1. the costs of investment in tangible or intangible assets

  2. the estimated wage costs of employment directly created by the investment project, calculated over a period of two years.


Intangible assets

Intangible assets must fulfil all of the following conditions:-

  1. they shall be used exclusively in the establishment receiving the aid;

  2. they shall be regards as amortizable assets;

  3. they shall be purchased under market conditions from third parties unrelated to the buyer;

  4. they shall be included in the assets of the undertaking for at least three years;


Wages as Eligible Costs

Employment directly created by the investment project shall fulfil the following conditions:

  1. it shall be created within three years of completion of the investment

  2. there shall be a net increase in the number of employees established compared with the average over the previous 12 months

  3. it shall be maintained during a minimum period of three years 


Aid intensity

The aid intensity shall not exceed: 1) 20% of eligible costs for small enterprises (employees less than 50 employees and annual turnover/balance sheet not exceeding €10m) and 2) 10% of eligible costs for medium enterprises (employees between 50 and 249 employees with an annual turnover not exceeding €50m and or/ balance sheet not exceeding €43m).


Article 29 GBER

FGLS loans that are offered under Article 29 must comply as follows:

The purpose of the loan is for investment in the process and organisational innovation of the business.

The eligible costs shall be the following:

  1. Personnel costs

  2. Costs of instruments, equipment, buildings and land1 to the extent and for the period used for the project;

  3. Costs of contractual research, knowledge and patents bought or licensed from outside sources at arm’s length conditions;

  4. Additional overheads and other operating costs, including costs of materials, supplies and similar products, incurred directly as a result of the project.

1Land and buildings for business premises only.

The aid intensity shall not exceed 50% of the eligible costs for SMEs.


The following types of aid are excluded under GBER

  1. Aid to export related activities towards third countries or other Member States, namely aid directly linked to the quantities exported, to the establishment and operation of a distribution network or to the other currently expenditure linked to export activity. 

  2. Aid contingent upon the use of domestic over imported goods. 

  3. Aid granted in the sector of processing and marketing of agricultural products in the following cases:

    • Where the amount of aid is fixed on the basis of the price or quantity of such products purchased from primary producers or put on the market by the undertakings concerned; or

    • Where the aid is conditional on being partly or entirely passed on to primary producers

  1. Aid to facilitate the closure of uncompetitive coal mines, as covered by Council decision No. 2010/787.

  2. The categories of regional aid excluded in Article 13.

  3. Where an undertaking is active in the excluded sectors as referred to in points (c), (d) or (e) above, and in sectors which fall within the scope of this Scheme, this Scheme applies to aid granted in respect of the latter sectors or activities, provided that appropriate means, such as separation of activities or distinction of costs, are taken to ensure that the activities in the excluded sectors do not benefit from the aid granted in accordance with this Scheme

  4. Aid in favour of an undertaking which is subject to an outstanding recovery order following a previous Commission decision declaring an aid illegal and incompatible with the internal market. 

  5. Aid to undertakings in difficulty. 

  6. Aid where the grant of aid is subject to the obligation for the beneficiary to have its headquarters in Ireland or to be predominantly established in Ireland, although the requirement to have an establishment or branch in Ireland at the moment of payment of the aid is allowed. 


  7. Aid subject to the obligation for the beneficiary to use nationally produced goods or national services. 

  8. Aid which restricts the possibility for the beneficiaries to exploit the research, development and innovation results in other Member States.


This is a summary of the State aid rules and applicants are advised to seek their own State aid advice and read the applicable provisions of the relevant Regulation. Please refer to Commission Regulation (EU) (EU) No 651/2014 for full details on GBER State aid rules.


Publication and Information under FGLS (ABER and GBER)

The information (see below) referred to in this Scheme will be published on the Strategic Banking Corporation of Ireland’s website for each individual aid award that exceeds:

  1. €500,000 for aid granted under GBER

  2. €60,000 for aid granted to borrowers active in the primary agriculture production under ABER

  3. €500,000 for beneficiaries active in the sectors of the processing of agricultural products and the marketing of agricultural products under ABER

in accordance with State Aid transparency rules.

Please note that the State aid amounts above represent the amount of aid that may be generated through the form of discounted interest rates on loans and does not represent the loan amount. Only the aid amount is required to be published and not the size of the loan. This will be monitored on a case by case basis and is not expected to arise in many situations.

Access to the State aid website shall be allowed to any interested party without restrictions. No prior user registration shall be required to access the State aid website. The following information on individual aid award shall be published:

  1. Reference of the identification number of the aid;

  2. Name of the beneficiary;

  3. Type of enterprise (SME/Small Midcap) at the date of granting the aid;

  4. Region in which the beneficiary is located;

  5. Sector of activity at NACE group level;

  6. Aid element, expressed as full amount in national currency;

  7. Aid instrument – Interest rate subsidy

  8. Date of granting the aid;

  9. Objective of the aid – investment.

  10. Granting authority – SBCI

  11. For article 17 aid, the name of the EIF, EIB and of the financial intermediary


Incentive Effect under FGLS (ABER and GBER)

This Scheme shall apply only to aid which has an incentive effect if the aid is being offered under ABER and GBER.

Aid shall be considered to have an incentive effect if the beneficiary has submitted a written application for the aid to SBCI or its on-lenders/agents before work on the project or activity starts. The application for the aid shall contain at least the following information:

  1. Undertaking’s name and size

  2. Description of the project, including its start and end dates

  3. Location of the project

  4. List of project costs

  5. declaration of any other aid obtained for the specific project


If work begins before the applicant has submitted a written application to SBCI, the whole project will be ineligible for aid.