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Growing Calls For Additional Business Supports

A lot done, more to do went an old political rallying cry in Ireland, but that appears to be the consensus about the financial support measures implemented in the wake of the Covid 19 crisis.

There are no controversies about who is applying or receiving the loans aimed at small business such as is the case in the US, but there is a view that a broader range of supports will be needed in the months ahead with the Banking & Payments Federation the latest to offer suggestions on a way forward for hard pressed businesses.

Representing the banking, payments and fintech sector in Ireland, they’ve published a policy paper entitled a Plan For Economic Recovery Of Irish SME’s which you can study with a cup of cocoa later and download here.

BPFI Chief Economist Ali Ugur reckons the measures could cost up to 8 billion euro to implement adding:

‘For the new state guarantee of loans to be effective for SMEs who need urgent liquidity and financial support, a number of key criteria would need to apply to the scheme:

  • 90% state guarantee for micro enterprises for loans up to €50k
  • 80% state guarantee for loans up to €5m for small and medium-sized enterprises
  • Repayment term to apply up to 10 years
  • Interest free for SMEs for 12 months (similar to the UK scheme, funding of interest during this period to be agreed)
  • Application process needs to be straightforward with an appropriately user-friendly application form.

It could be argued that a major roadblock for the plans would be the suggestion that ‘eligibility of a borrower for the scheme by the fund does not imply credit approval which must be sought from one of the banking providers.’.

Many have raised questions about whether the banking sector will have enough boots on the ground to handle queries from business clients when the economy re-opens, and will they have the willingness to support these businesses or even sign off on new state measures.
In a nod to the banking climate prior to the pandemic Dr Ugur suggests ‘current SME Regulations issued in 2016 contain requirements on affordability assessment and we believe that these should be waived for the proposed new scheme during this crisis period.’

Dr. Ugur said that experience from other countries also showed that speed, scale and simplicity of state guarantee schemes would be crucial in terms of getting the money into businesses affected during the COVID-19 crisis. “At the heart of Irish SMEs’ survival and their capacity to withstand the economic hurricane that is COVID-19 is the central issue of liquidity. It is the most fundamental element in the survival plans for Irish businesses and without liquidity support, businesses will quite simply struggle, if not find it impossible, to survive”, added Dr. Ugur.

In addition to the state guaranteed COVID Business Support Fund, BPFI’s Plan for Economic Recovery paper sets out a range of proposed measures to support Irish SMEs. These initiatives include, among others, an improved SBCI COVID-19 Working Capital Loan Scheme, the establishment of a special task force for SMEs and more efficient and cost effective examinerships for SMEs.

The BPFI Chief Economist said: “Thousands of SMEs will require a cash injection to get back up and running again and to provide support during the initial six to nine months of trading until confidence is re-established and the economy returns to some form of normality.”

In good news for mortgage holders and bank loan customers, it appears agreement is also close on extending the repayment moratorium introduced after the lockdown with news on that said to be ‘imminent’, whatever that means but it sounds positive.