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Anxiety remains for small business owners despite government recovery plans

Some €2 billion has been promised to SMEs through credit guarantee scheme.

Image: Leon Farrell

BUSINESS OWNERS ARE still digesting the government’s ‘Road Map for Reopening Society and Business’ and the package of recovery measures, announced over the bank holiday weekend.

So far, the mood music from small businesses has been broadly positive but anxiety is still palpable among owners and industry lobbyists about the future of the small and medium enterprise (SME) sector.

Georgia Visnyei employed eight people at her cafe and coffee wholesaler the Art of Coffee based in Carrick-on-Shannon, Co Leitrim.

She said that in the wake of the government’s business restrictions, ”in a matter of a few hours, 99% of our income was gone. There was no way to keep anyone on the payroll so everybody was temporarily laid off”.

“We did takeaway coffee for the first two weeks. But at the end of March when the stricter restrictions came into effect, that was the point that I decided that I’m not risking anything and to close down.”

Visnyei has since ‘pivoted’ to online sales but she is looking forward to the day when she can hire back her staff and open the cafe again. According to the government’s Road Map, this should happen on 29 June.

She said she was “delighted” with the Road Map because it allows her “to plan ahead”.

But what about the other measures announced last weekend, the government’s business recovery plan?

Headline figure

Last Saturday, finance minister Paschal Donohoe also unveiled a package with a headline figure of €6.5 billion.

Some €2 billion of this is to be made available through the Ireland Strategic Investment Fund (ISIF), the state’s sovereign wealth fund. 

Only large companies that employ 250 people or more or have an annual turnover of €50 million will be able to apply for investment from the ISIF fund.

SMEs are defined as firms that employ up to 249 people. According to the most recently available data from the Central Statistics Office, they employed over 68% of the Irish workforce in 2017 and made up an overwhelming 99% of all the firms in Ireland.

Another €2 billion has been promised indirectly to SMEs through a Credit Guarantee scheme to banks.

The aim is to support below-market-interest-rate lending to small and medium enterprises for terms ranging from three months to six years. This, however, will require new legislation, which means that a new government will have to be formed before it can be rolled out.

Around €250 million has been ring-fenced for SMEs in ‘restart grants’ of up to €10,000 per business. This will be based on a commercial rates waiver for 2019.

But the €2 billion guarantee is the main provision for smaller businesses and while owners are grateful for anything they can get right now, questions remain about whether it will be enough.

“It’s great that these loans are there and easy to apply for and the interest rates are supposed to be below the commercial rates. That is brilliant. But if I have to get a loan just to cover the operational costs and I have to pay interest rates on that, I still see it as a burden,” Visnyei said.

Overall, she believes that the most important thing the government can do for small businesses like hers is to ensure that “people have money”.

Visnyei explained, “Customers are worrying about how to pay their mortgage, their rent, their food. No matter if I get low-interest rates from the government, I won’t have anybody to serve.”

“What I’d like to see is that my customers have disposable income, right? So they don’t have to worry about how they pay their mortgage, their bills, their food or whatever. Because I’m in that kind of business and I need customers to treat themselves with good coffee and cakes and stuff like that.”

Business restrictions

Lee Daly is similarly agnostic about the credit guarantee.

“The focus seems to be very much on loans. Loans I think are fine. But the reality is [small businesses] are going to be accumulating debt. And at a certain point that starts to affect the viability of things. Because those debts will just become too large and businesses either need to close down, or they need to have those debts forgiven.”

Just before the business restrictions were put in place, he was getting his Brazilian jiu-jitsu gym in Dublin, Celestial BJJ, off the ground.

“I was due to move to new premises, which I had been lucky enough to get. It was pretty basic but it got us out of just running classes in a dance studio”.

Under the ‘Road Map for Reopening’, Daly won’t be able to teach another class until at least 10 August, when “close physical contact sports… can resume”.

He said that he supports this and that he doesn’t “want to open up until I can see it being the right thing to do”.

Daly is concerned about the closure of small, specialist businesses like his migh mean for the landscape of the fitness industry in Ireland if only large, cash-rich gym chains are left standing in the wake of the pandemic.

He said, “There needs to be some variety because not everybody wants to go to the gym and lift weights, you know? It’s not the right thing for everybody to do for all sorts of reasons.”

A drop in the ocean

Various business representative and lobbying groups like the Small Firms Association have also praised the recovery plan as a key first step. Some are calling for much more to be done.

Neil McDonnell is the chief executive of the Irish Small and Medium Enterprises Association (ISME), a lobbying and professional services body for the sector.

Overall, he welcomes the measures but believes that there is too much focus on debt solutions when what small firms need is cash so they can pay their creditors.

McDonnell described the €250 million figure as “an absolute drop in the ocean. It’s a decimal of a per cent of Gross National Income”.

This week, ISME and other lobbying groups, including Retail Excellence Ireland and the Restaurants Association of Ireland announced the formation of something called the SME Recovery Initiative.

Chaired by the former secretary general of the Department of Finance John Moran, the new group is calling for the government to pump €6 billion into small enterprises through “improved liquidity schemes”.

But McDonnell said that ISME has been calling for a three-pronged response to the crisis from the government for several months.

“We need a liquidity solution for the present needs of business. We need an examinership solution that works for SMEs because the current provisions in the Companies Act don’t work. And the third leg of the stool then is we need a detailed back-to-work plan.

“The only one of those that’s been delivered has been the back-to-work plan,” McDonnell said.

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