The Covid-19 Credit Guarantee Scheme, a Covid-19 support soon to be launched by the Government, will allow banks to provide financial support to struggling Irish business, according to a Bank of Ireland senior executive.
Designed to address the economic impacts of the pandemic, the Covid-19 Credit Guarantee Scheme sees the State guarantee 80pc of any loan provided by a lender. Some SME industry groups had raised concern that the package was not attractive enough to convince banks to lend to hard-hit SMEs.
Michael Lauhoff, director of business banking at Bank of Ireland, said the scheme would help participating banks lend to businesses that were viable pre-Covid-19 but were now struggling.
"It absolutely is attractive [for banks to lend]," he said of the scheme. "The Government is taking 80pc of the risk. There must be an element of risk-sharing. It is important that there is that consideration of viability, albeit it is pre-Covid that viability assessment is completed. [We must be] applying a risk view on it to make sure we have skin in the game and to make sure that businesses that were viable before March do get the funding.
"In terms of our purpose, we need our communities and customers to thrive," he added. "This is a moment of truth for us to make sure we are backing our customers and giving every SME that was viable pre-covid-19 the opportunity to trade back out of this and provide the necessary liquidity to do that."
To qualify for the scheme, SMEs will have to declare an adverse impact of a minimum 15pc of actual or projected turnover or profit due to the effects of Covid-19. The total amount available under the scheme is €2bn, with the size of the loan linked to business turnover (25pc of 2019 turnover) or wage costs (double annual wage bill in 2019).
Lauhoff said the new scheme was a priority for Bank of Ireland. Should it experience high demand, he said the bank is ready to put significant resources behind its operation, including people and technology. He said rates on any loan would be more attractive than usual and would be below 3.25pc.
According to Lauhoff, Bank of Ireland had been busy providing other support to the business community. He said the bank had provided over 14,000 payment breaks to its business customers, with around 70pc going on to take a second payment break. He said a very low number of businesses were still coming to the bank for their first payment break.
Lauhoff said he had seen a more substantial recovery in activity since the economy reopened than expected. Since cases had started to rise again, more businesses were expressing concern over Covid-19, but were also wary about Brexit.
Overall, Lauhoff feels support to business had been strong, helping a number of firms get through the initial stages of Covid-19.
"What we hear from our customers is that businesses have been supported in a way that had enabled them keep employees and reopen once the restrictions were lifted," he said. "There is still unease about what the future may hold, but the supports have helped sustain a number of businesses that wouldn't have been able to survive without it."
