Ireland: Managing conversations with lenders
Please be assured we are well resourced, capable and here to help with a wealth of banking, restructuring and debt advisory experience in the Clearwater International team.
Government support for working capital
- The Credit Guarantee Scheme supports loan facilities from €10,000 to €1m for terms of up to seven years, that encourage additional lending to SMEs. The Government will offer a partial guarantee to banks against losses on qualifying loans from AIB, Bank of Ireland and Ulster Bank to eligible SMEs
- Microenterprises can access COVID-19 loans of up to €50,000 from MicroFinance Ireland. Loans are available at interest rates of 6.8% or 7.8%. Terms including a six months interest free and repayment free moratorium
- The €200m SBCI COVID-19 Working Capital Scheme for eligible businesses offers a maximum loan size of €1.5m and a maximum interest rate of 4.0%. The first €500,000 will be unsecured
- A €200m package for Enterprise Supports is available through Enterprise Ireland. This includes a Rescue and Restructuring Scheme for vulnerable firms that need to restructure
Additional government support to be aware of
- Employees of businesses that need to reduce hours or days worked can avail of the Department of Employment Affairs and Social Protection (DEASP) Short-time Work Support
- Employers who have to temporarily lay-off staff are asked to keep their employees on the payroll and pay them an amount of €350 - the equivalent of the COVID-19 support payment. When they submit payroll returns to Revenue via their payroll provider, Revenue will refund the employer the €350
- Employers can also avail of an emergency wage subsidy scheme under which the Government will pay 70% of a worker’s salary up to a cap of €410 per week net. Employers must self-declare to Revenue that they have experienced significant negative economic disruption due to COVID-19, with a minimum of 25% decline in turnover. This scheme is open to impacted employers in all sectors
- The DEASP and the Department of Business, Enterprise and Innovation will provide a joint First Responder support service through the Intreo Offices and development agencies, Enterprise Ireland and IDA Ireland in each region to provide tailored supports for impacted firms
- A Finance in Focus grant of €7,200 will be available to Enterprise Ireland and Údarás na Gaeltachta clients that want to access consultancy support to undertake immediate finance reviews
- Enterprise Ireland has a number of supports available to help businesses mitigate the impact of COVID-19. Their COVID-19 Business Response Plan outlines the COVID-19 support available. Further information can be found here
- The Government has agreed support for businesses impacted by COVID-19 through commercial rates deferral
- Further information on DEASP measures can be found here
Credit process – bank priorities
In an attempt to accommodate the above, lenders will:
- Prioritise existing borrowers above new business, particularly where providing short-term liquidity that protects existing credit exposure
- Look at entities with immediate cash requirements ahead of those who are contingency planning
- Pay close attention to pre-COVID-19 performance
- Consider a range of measures, including rescheduling current capital repayments and potentially rolling up interest in addition to providing “new money”
Coronavirus is a major consideration however it will not be seen as a 'get out of jail free' card.
Our advice - be prepared
- Ahead of approaching a lender, prepare downside forecasts showing the anticipated impact of COVID-19 which can be presented against your BAU forecast. Cash analysis is essential and should extend past the usual 13 weeks in detail
- Highlight measures taken and planned to protect profitability and cash. Have all available options been considered/pursued?
- Ensure that the lender is aware that the business is “backable” in normal circumstances. Portray the business in its best shape
- The proposal to the lender needs to clear and well thought through. Focusing on what lenders require for their decision will help expedite the credit process and get a positive response
- Consider alternative sources of liquidity at the same time as speaking to your incumbent bank.
Things will undoubtably change as the situation continues to unfold and we will ensure we keep you up to date with our practical views on the Government’s financial support measures.
More importantly we are here to help so if you have any questions or concerns don’t hesitate to call us for advice.