Strategic Banking Corporation of Ireland (SBCI)’s COVID-19 Working Capital Scheme
Many businesses are faced with difficult decisions arising from the COVID-19 crisis, and are undertaking an analysis of their business and devising a plan for how they will get through the challenging weeks and months ahead. Consideration should be given to the range of options which have opened up in recent weeks in order to guide their businesses and employees and out of this unprecedented pandemic. One such option which has been made available for Irish Small and Medium Enterprises (“SME”) is the SBCI COVID-19 Working Capital Scheme, the details of which are set out below.
The SBCI COVID-19 Working Capital Scheme (the “Scheme”) has made €200 million available to support eligible businesses with loans from €25,000 up to €1.5 million in order to fund working capital requirements or innovation, change or adaptation of the business to mitigate the impact of COVID-19.
The loans will be available through AIB, Bank of Ireland and Ulster Bank and will be subject to each bank’s credit policies and standard loan application procedures.
Before a business can approach one of the above banks to apply for a loan through the Scheme, they must hold an eligibility letter issued to them by the SBCI. The following criteria must be met in order for the SBCI to grant a business eligibility to enter the scheme –
- The business must be an SME (i.e. have fewer than 250 employees, have (i) a turnover of €50 million or less or alternatively (ii) €43 million or less on its balance sheet, be independent and autonomous, have less than 25% of their capital held by public bodies, and be established and operating in the Republic of Ireland), or a Small Mid-Cap business of fewer than 500 employees; and
- The business must be impacted by the Covid-19 virus resulting in business turnover/profitability being negatively impacted by a minimum of 15%; and
- The business must be able to show, with particular evidence required dependent on which category is chosen, that the business meets one of 11 innovation criteria set out by the SBCI, which include:
- At least 80% of the Scheme Loan will be spent on research and innovation activities associated with your response to the COVID-19 challenge with the remainder on costs necessary to enable such activities; or
- You intend to use the loan to invest in producing, developing or implementing new or substantially improved products, processes or services or production or delivery methods (including business models) that are innovative, and where there is a risk of technological, industrial or business failure as evidenced by an external expert.
There are also circumstances in which an otherwise eligible SME will be rendered ineligible for the Scheme, mostly related to the business having been in some form of financial difficulty pre-COVID-19. Businesses involved in the primary agriculture/ aquaculture sector are also precluded from taking part in the Scheme.
If a business believes that it is eligible based on the above criteria and wish to apply for a loan under the Scheme, they can submit an Eligibility Application form to the SBCI, available at sbci.gov.ie. The SBCI require certain proofs depending on which of the 11 innovation criteria the business is applying under, which will include the need to submit an up to date business plan demonstrating the means by which the business intends to innovate, change or adapt in response to the challenges being posed by the current crisis.
Once you receive confirmation that your business is eligible for the scheme from the SCBI, the next step is to engage with one of the designated banks to begin their standard loan application process. It is only at this stage that a decision will be made on credit approval. Some of the notable points in respect of loans taken out under this scheme are as follows:
- No security will be required for loans up to €500,000
- The interest rate charged, though at the discretion of the participating banks, is limited at a maximum of 4%, and is a fixed rate for the period of the loan
- Loans range from periods of 1 year up to 3 years in duration
- Optional interest-only repayments for a period of three months may be available at the outset of the loan
If on reading the above, you find that this particular scheme is not suitable for your business, you may wish to consider the following aids which have also been made available recently:
- Credit Guarantee Scheme – supporting loans up to €1 million for periods of up to 7 years. Eligibility criteria apply.
- COVID-19 loans for microenterprises – loans of up to €50,000 from Microfinance Ireland. Terms include a 6 months interest free and repayment free moratorium. Businesses can apply through their Local Enterprise Office or directly at microfinanceireland.ie. Eligibility criteria apply.
- Enterprise Ireland €200m Package for Enterprise Supports which includes a Rescue and Restructuring Scheme is available for vulnerable but viable businesses that need to restructure or transform their business.
We will be publishing notes on these alternative options in the coming weeks, so please check back for further information.