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BPFI publishes ‘Economic Recovery Plan’ setting out measures to facilitate liquidity and capital flow to thousands of Irish SMEs

New state backed loan scheme essential for survival of businesses

Launching details of the Banking & Payments Federation (BPFI)’s Economic Recovery Plan for Irish SMEs, BPFI Chief Economist Ali Ugur, said: “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. 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. Ugur said the estimated scale of the proposed new guarantee scheme could range from €6 billion – €8 billion, depending on the number of Irish SMEs that would require it in the economically challenging months ahead. “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
  • There should be no portfolio cap applied
  • 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)
  • General interest rates to be aligned with state guarantee provided
  • Limits on restructuring of existing debt to be agreed
  • Application process needs to be straightforward with an appropriately user-friendly application form. It should be clear that confirmation of 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.
  • 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 the state guarantee scheme 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.

The state guarantee of loans to SMEs proposal is one of a number of initiatives which are being published by BPFI today as part of its Plan for Economic Recovery of Irish SMEs paper. The plan sets out possible measures that banks and the Government, can take in order to facilitate liquidity and capital flow to cash strapped businesses at an affordable cost with the State’s support.

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.”

“At the outset of this crisis BPFI members responded with the introduction of payment breaks for up to three months for business customers with over 14,000 SME payment breaks granted or in the process of being granted over the past six weeks. While these will help to cushion the immediate economic impacts of the current crisis, further swift action is now required to ensure otherwise stable business can see this crisis through. The impact of the COVID-19 pandemic on Irish SMEs in the space of just six weeks has been severe in the extreme and is evident in the number of business closures, plummeting turnover, falling profits and, most of all, in terms of the numbers of unemployed arising from the rapid decline in economic activity across a whole range of sectors in the Irish economy.” Dr Ugur concluded.


About: Banking & Payments Federation Ireland (BPFI) represents the banking, payments and fintech sector in Ireland.  Together with its affiliates, the Federation of International Banks in Ireland and the Fintech & Payments Association of Ireland, BPFI has 100 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Contact: For further information contact Jillian Heffernan, Head of Communications,   087 9016880