Call for loan guarantee scheme to ensure Irish SMEs’ survival

Banking Federation urges Government to consider a loan guarantee plan to help ensure the survival of Irish SMEs.

The Banking & Payments Federation Ireland (BPFI) has published an Economic Recovery Plan that urges Government to set up a scheme that offering 90pc guarantees on loans up to €50,000.

BPFI estimates that the scale of the proposed new guarantee could range from €6bn to €8bn depending on the number of Irish SMEs that would require it in the challenging months ahead.

“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”

“Irish SMEs will require a range of state supports, the most significant of which must be a new state guaranteed Covid Business Support Fund if they are to stand a chance of survival and recovery in the months ahead,” said Dr Ali Ugur, chief economist with BPFI.

“A new state guaranteed scheme would enable government guarantees of emergency loans to Irish SMEs, temporarily distressed as a result of Covid-19, but who are otherwise creditworthy borrowers.”

Dr Uger said that for the proposed 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. These include a 90pc State guarantee for micro enterprises for loans up to €50,0000, an 80pc State guarantee for loans up to €5m, repayment terms can apply up to 10 years and that SME loans be

“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.

3-month payment break extension

The proposed scheme comes just as the BPFI confirmed that a further three-month extension to the current payment break will be made to customers who continue to be impacted by the fall-out from the Covid-19 pandemic.

The BPFI said that its member banks have supported more than 65,000 mortgage payment breaks and more than 22,000 SME payment breaks over the past six weeks.

The same extension arrangement will also be available to Covid-19 impacted customers who may yet apply for a payment break.

“Today’s confirmation of an extension of the payment break for those customers directly impacted by Covid-19, is an important signal to those most affected, be they mortgage holders, those with personal loans or SMEs,” BPFI chief executive Brian Hayes said.

“BPFI has had excellent engagement with the Central Bank of Ireland on behalf it its members and we appreciate the pragmatic approach being taken across the board to the challenges facing those impacted by Covid-19.

“BPFI and its members fully appreciate that people are going into a very uncertain period in the weeks and months ahead and our objective is to allay their worries by offering as much relief and certainty as possible in these unprecedented times.”

Written by John Kennedy (john.kennedy3@boi.com)

Published: 30 April, 2020