New Irish government support for SMEs

On 8 April 2020, the Minister for Business, Enterprise and Innovation, Heather Humphreys TD, announced details of the further package of support measures that her department has put in place for SMEs impacted by COVID-19 bringing the overall support package to EUR1 billion. The new measures include a EUR450 million expansion of the two loan schemes operated by the Strategic Banking Corporation of Ireland, an expansion of the MicroFinance Ireland COVID-19 loan scheme by EUR13 million to EUR20 million, together with a reduction of interest rates from 7.8% to 4.5%, a new EUR180 million Sustaining Enterprise Fund for firms in the manufacturing and international services sectors that are considered “vulnerable but viable”, an investment of EUR7.6m to help firms trade online and free mentoring and online training for all businesses.

Full details of the new measures can be found here.  A summary is set out below.

Strategic Banking Corporation of Ireland (SBCI) schemes

• an additional EUR450 million of lending will be provided through the SBCI for SMEs in all sectors including agri-food. The working capital loan scheme will increase by EUR250 million to EUR450 million. No changes have been made to the terms of the scheme – loans can be between EUR25,000 and EUR1.5 millon, with up to the first EUR500,000 unsecured and a maximum interest rate of 4%. Interest-only repayments may be available at the start of the loans; and
• the future growth loan scheme is to increase by an additional EUR200 million. This scheme offers loans of between EUR100,000 and EUR3 million with a term of 8 to 10 years and up to the first EUR500,000 unsecured, at a maximum interest rate of 4.5%. Interest-only repayments may be available at the start of the loans.

Sustaining Enterprise Fund (SEF)

• the SEF, administered by Enterprise Ireland, will provide repayable advances of up to EUR800,000 to firms with 10 or more employees impacted by COVID-19 that operate in the manufacturing and internationally traded services sectors and which are “vulnerable but viable”. Applicants must have exhausted all other financing options available to them, whether from the market, financial institutions or the SBCI, and demonstrate that they have been unable to raise sufficient funding from those sources before applying to the SEF for an advance. Advances will only be repayable if and when a business returns to financial good health.

MicroFinance Ireland

• a further EUR13 million is being allocated to MicroFinance Ireland to provide loans of up to EUR50,000 to micro-enterprises. The interest rates on loans available to all micro-enterprises with less than 10 employees has been reduced from 7.8% to 4.5% where the application is made through the Local Enterprise Office. The new rate for direct applications to MicroFinance Ireland will also be reduced to 5.5%.

Other measures

• Business Continuity Voucher: a new EUR2,500 business continuity voucher is available for businesses that employ up to 50 people to develop short-term and long-term strategies to respond to the coronavirus pandemic. This is available through Local Enterprise Offices;
• Trading Online Voucher Scheme: an additional EUR3.3 million is being provided to help small and micro enterprises to trade online. Two vouchers of up to EUR2,500 each, along with training and advice, are available to eligible applicants. The vouchers can now be used for a subscription to low-cost online retailing platform solutions to allow firms to quickly establish a retailing presence online. This is available through Local Enterprise Offices;
• Covid-19 Retail Online Scheme: a new EUR2 million scheme, which will be run by Enterprise Ireland, will be made available to companies in the retail sector which employ more than 10 people to assist those businesses in developing a more competitive online offering. Successful applicants will receive funding support of up to 80% of project costs, with a maximum grant of EUR40,000;
• Business Financial Planning Grant: a grant, to be administered by Enterprise Ireland, to the value of EUR5,000 has been introduced to assist companies in the development of a business sustainment plan and to engage the services of an approved financial consultant to develop this plan for use when applying for bank or investor funding;
• LEAN Business Improvement Grant: a new EUR2,500 grant, to be administered by Enterprise Ireland and IDA Ireland, is being introduced to provide eligible applicants with training / advice to deal with the current economic environment and identify the key measures needed to ensure continued viability; and
• Competitive Start Fund: a new EUR750,000 Competitive Start Fund run by Enterprise Ireland is now open to applications from to all start-ups and early stage companies in all sectors in manufacturing and internationally traded services. The maximum support available is EUR50,000 for a 10% ordinary equity stake in the start-up company.

As the situation in respect of COVID-19 continues to cause prolonged and unprecedented market disruption, the foregoing governmental assistance together with the forbearance and support measures previously announced by the Irish banks, credit servicing firms and retail credit firms (link to previous briefing here), provide a very welcome lifeline for struggling businesses. However, the sustained viability of many of those businesses will most likely also require longer term, tailored funding in the form of private capital – be that debt or equity – to meet their liquidity needs and to assist with their financial rehabilitation. In an environment where “cash is king” and with valuations retreating, this presents a real opportunity for distressed and alternative funds and lenders with pools of private capital to deploy who should be well-placed to provide essential funding across the capital structure.