Tuesday, June 30, 2020

By Juno McEnroe

A second wave of Covid-19 could trigger more business losses meaning there is a need for immediate cash injections to protect SMEs, TDs have been told.

The new coalition’s July jobs stimulus must include detailed plans to fund SMEs and not saddle them with debt, the Oireachtas Covid-19 Committee was warned.

Chairman of the SME recovery fund John Moran outlined proposals for a €15bn bailout to help the sector, €6bn of which needs to be paid immediately.

This money needs to be given out as grant aid and not loans or long term debt, a situation which arose in the last recession, Mr Moran explained.

“I don’t think the State is getting ahead of the problem. Our firms are looking at pages and pages of application forms,” warned Mr Moran about existing grant schemes which are only delivering small cash injections for SMEs.

“Time is running out…these businesses bring oxygen into our local communities,” he told TDs.

Mr Moran said the existing guarantee scheme does not work and there is a need for new mechanisms, particularly in the July stimulus plan next month.

This multi-billion euro package is still being assessed by the government, but is likely to try and reduce VAT for businesses and also extend the wage subsidy scheme.

But Mr Moran said firms cannot wait.

Jean McCabe, managing director of Willow Boutique, said government measures so far are being “drop fed out”.

The SME sector is “the backbone to the Irish economy”, she said.

Mr Moran warned that most businesses run on only two months’ cash reserves but have now been doing so for over three and half months in the pandemic.

“Built-in protections” are needed if there is a second wave of the virus, he told TDs, and the country “has to do everything” to prevent another mass spread of the virus. Otherwise there will be further serious SME losses, he said.

Committee member TD John McGuinness said SMEs are “dying on their feet” and banks are refusing to lend to them even though they could be facing a second wave.

Government needs to provide “free money”, he argued, and grants that are easy to draw down.

Sinn Fein TD David Cullinane warned that without robust supports, SMEs will shut resulting in “boarded up shop fronts right across towns”.

Derek Butler, a chair of Grid Finance, which operates small lending, said that the July stimulus plan will be “dead on arrival” if SME are not listened to, like they have been in other countries.

The plan needs to be of “magnitude and scale” to support the country’s 100,000 SMEs that employ over half a million people, he told the committee.

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