Ballast For Business

Multiple supports are available to help businesses navigate the choppy waters of the Covid-19 pandemic, writes Doug Casey

Government supports should be the first port of call for businesses struggling to stay afloat through the Covid-19 pandemic. The range of supports on offer is broad and evolving, comprising pre-existing schemes tweaked for more efficacy and new initiatives launched by the state since the pandemic took hold.

For micro and small firms, their Local Enterprise Office (see page 46) should be the first port of call, as their role is to clue in clients as to what’s available. When Kildare, Laois and Offaly were locked down recently, €1m was ring-fenced for the LEOs in the three counties to increase engagement with local businesses to ensure they are aware of the loans, grants and vouchers they are entitled to.

Many LEO supports are wellknown, some not so familiar. For the lockdown counties, the Department of Business singled out the Technical Assistance for Micro Exporters grant, which part-funds the costs that can be incurred investigating and researching export markets. The grant covers 50% of eligible costs to a maximum of €2,500 per year.

Among the current business supports, the Restart Grant, now upgraded to Restart Grant Plus (see page 44) is the largest. Due to the recent lockdown, Kildare businesses will receive a further 20% top-up to the Restart Grant Plus, equivalent to a 40% uplift overall, bringing the new minimum grant to €5,600 and the maximum grant to €35,000. The grant is claimed from local authorities and has to be applied for before September 30.

This funding will help but the grim reality is that pre-Covid large numbers of SMEs in certain sectors were operating on a knife-edge. Analysis by the Central Bank suggests that available credit for accommodation and food service businesses is almost fully utilised. It also suggests that SMEs in the sector are relatively more indebted, with one-in-five reporting a debt-to-turnover ratio of more than 0.5, compared with only 6% for all SMEs.

Banking & Payments Federation Ireland data, which covers the five main retail banks, shows that 23,700 SME accounts and 3,300 corporate accounts were still on active payment breaks at the end of July. That’s a quarter of the value of business loans and advances.

AIB, Bank of Ireland and Ulster Bank offer Covid-19 Working Capital Loans and in July 720 loans with the Strategic Banking Corporation of Ireland (SBCI) had been approved, valued at almost €89m. The same banks offer the Future Growth Loan Scheme, which was expanded from €300m to €800m. It provides for long-term loans of up to €3m for investment by SMEs and other businesses with fewer than 500 employees.

BPFI chief economist Dr Ali Ugur believes that the new Credit Guarantee Scheme, passed into law but not yet up and running, will make a big difference for SME borrowers.

The state is providing an 80% guarantee against bank losses on qualifying loans to eligible SMEs.

“Given continued uncertainty around the future outlook due to the pandemic and changing public health measures, it is likely that this scheme will be particularly important in the third quarter of 2020,” he says.

The CGS will be managed by the SBCI, with funding available through AIB, Bank of Ireland and Ulster Bank. The CGS’s financial products will include overdrafts, term loans and working capital. A standard facility size range of €10,000 to €1m will be in place, and borrowers will have to declare an adverse impact of at least 15% of actual or projected turnover or profit due to Covid-19.

A guarantee premium on each CGS loan is levied in addition to interest rate costs. For SMEs it is 0.25% in the first year, 0.50% in years two and three and 1.0% in years four, five and six. The scheme will be available initially until 31 December 2020. The rollover of loans will be facilitated but no CGS loan can extend beyond 31 December 2026.