We have the Roadmap, now where do we find the Transport?
An Taoiseach, Leo Varadkar has given the country renewed hope with the publication of a 5 phased plan for a return to a "new level of normality". The news and indeed the plan have been broadly welcomed. Following this, a further range of business supports were announced by Minister for Finance Paschal Donohoe with €2b being set aside for SME's.
This support structure will take the form of loans ranging from €10k to €1m and will be 80% guaranteed by the State with below market rates of interest.
As an owner of a SME and indeed an advisor to multiple SME's on the face of it this all sounds like positive steps forward.
You've show us the roadmap, now tell us how to find the transport. Or more simply, tell us how will this support package be implemented?
Let us consider its current predecessor, the SBCI Covid-19 Working Capital Loan Scheme. A loan of between €25k and €1.5m, 4% interest, unsecured up to €500k , terms ranging from 1 to 3 years. Sounds great, until you look closer. A key point arising with the SBCI Covid-19 Working Capital Loan Scheme is that it cannot be used for the "Refinance of undertakings in financial difficulties" - please show me an SME not in financial difficulty in these unprecedented times.
As with all loans administered through banks in this country, loan applications are considered under strict underwriting criteria and lending rules. Banks will point to Central Bank Governance and reference such items as Tier 1 Capital Adequacy ratios, Lending Provisions etc. These are valid concerns of banks as they must operate within certain parameters to be economically viable and retain ECB lending support. The Central Banking rules have become corner stones of the financial industry in an effort to starve off a return to the dark days of the recession following the financial meltdown in 2009.
All that said, if the SBCI Covid-19 Working Capital Loan Scheme is an accurate representation as a forerunner for what the new SME Support might look like at implementation stage, then Buyer Beware as it will not have the effect of stimulating small business.
Small business needs uncomplicated packages enabling them to restart. They need time and space. The package must be flexible in terms of its repayment. Businesses will not simply just open the doors and see the general public flocking to them. Any package needs to respect and reflect that simple fact.
If businesses are to engage the help of professionals who like this writer will be only too happy to assist with banking applications then let businesses and their professionals know the parameters upon which they must work. Let them tackle the cost saving measures that will undoubtedly be needed to facilitate a return to work and a kickstart to the economy.
Do not leave the SME at the mercy of the bank loan application and allow the banks to simply hide behind bureaucratic regulatory red tape. We all accept it exists but tell us and tell the banks what a viable entity is considered to look like and how it must perform to satisfy this red tape.
In conclusion, it is imperative for the government to take steps to show business how they can be assisted to reopen as opposed to simply telling them when it may be possible. It will save businesses in terms of professional costs and will also afford businesses the opportunity to engage with their laid off staff in a productive manner. The sooner that businesses can get back to work the sooner we can return to the new level of normality.