- Click here for a Support FAQ relating to Customer Payment Breaks
- Click here for a Support FAQ relating to Payment Services
- Click here for a Support FAQ relating to Vulnerable Customers
- Click here for a Support FAQ relating to Mortgages
- Click here to download ‘SMEs A Guide to Covid-19 Financial Support Measures’
- Click here to download ‘Banks and SMEs: the business of lending and borrowing’
How are banks supporting business customers?
The banking and finance industry is doing its utmost to deal with COVID -19 affected customers in an empathetic manner through this unprecedented and difficult time. Lenders are very conscious of the challenges that businesses are facing in dealing with their employees, suppliers, customers and delivery channels as well as their cash flow management.
The retail banks (AIB, Bank of Ireland, KBC, Permanent tsb and Ulster Bank) have put in place measures to support their customers whose business is impacted, as have all other BPFI members.
Various channels are available (Relationship Manager/Branch/Phone/Online) for businesses customers to apply for the support they require.
It is very important that businesses engage early with their finance provider to address cashflow issues which may impact on repayments on existing credit facilities or result in the need for emergency/ additional working capital/trade finance facilities.
Businesses are generally looking for / requesting three types of support: a payment break, which tends to be the immediate priority, emergency/additional working capital or funding to support the transition of their business to a post-COVID-19 environment.
What are the timelines on Payment Breaks?
An initial payment break for up to three months is available on existing borrowings. This will provide breathing space to business customers in respect of existing loan facilities and give them time to deal with urgent business continuity and staffing issues.
On expiry of the initial 3-month payment break, you may apply for an extension to the payment break of up to a further 3 months. You might do so if you are still impacted by COVID-19 and not yet in a position to return to full repayments, but you expect to be able to return to full repayments at the end of the payment break extension.
A deadline of 30th September 2020 has been set by the European Banking Authority (EBA) for lenders to process and grant payment breaks to customers.
If you haven’t already availed of a payment break but have been impacted by COVID-19 and feel you may have difficulty meeting repayments, it is essential that you contact your lender as early as possible to be able to avail of a payment break and to allow your lender sufficient time to process your application before 30th September 2020.
How do I apply for a payment break?
You should contact your lender directly to request a payment break. Lenders have established designated contact channels to receive applications and to process these as speedily and efficiently as possible. Payment breaks are not applied automatically to customers’ accounts – you need to contact your lender to inform them that you have been impacted by COVID-19 and are unable to meet your repayments as a result.
How does a Payment Break work for business customers?
Payment breaks can take a number of forms depending on what best suits your business circumstances.
1. ‘Moratorium’ Payment Break – generally this means that your full loan repayment is postponed for an agreed period of time so you do not pay any capital or interest during the period of the payment break.
Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, either your future loan repayments will increase so that the loan is fully repaid within the original term of the loan or your lender may facilitate a term extension for your loan which means that your repayments would remain the same, but over a longer period of time, so therefore the cost of credit over the life of the loan will be higher.
2. ‘Interest Only’ Payment – another option which may suit some businesses where they have the capacity to do so, would be to pay the interest as it arises during the payment break. You do not pay any capital which means that your repayments will reduce to cover just the interest. Your loan balance will not reduce during this period.
Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan. However, your lender may facilitate a term extension for your loan which means that your repayments would remain the same, but over a longer period of time, so therefore the cost of credit over the life of the loan will be higher.
Either way a payment break will give rise to a higher total cost of the loan.
Businesses that need to arrange a payment break should check their finance provider’s website – it may be possible to apply online or arrange it by phone.
A payment break can provide businesses with the space to start planning for the next few months, analysing current and expected cashflows, how costs and risks to the business can be mitigated and how best to deal with customers and suppliers.
Toward the end of a payment break finance providers will engage proactively with businesses to discuss and review whether the return to full repayments is possible or whether other repayment alternatives may need to be considered.
What is the cost of availing of a payment break?
There is no upfront cost associated with availing of the payment break. However, you will be charged interest on any repayments that are not made over the course of the payment break – the initial 3 months and for any additional months you avail of.
This is because when a borrower has a payment break, the interest continues to be charged to the account, increasing the overall outstanding balance owed as a result. This means that at the end of the payment break, the balance is higher and therefore, the total amount a borrower pays back to the lender over the lifetime of the loan is higher. What this means for you will depend on the interest rate on your loan and the value of your monthly repayments. Your lender will provide you with details of these costs specific to your loan.
What type of questions am I likely to be asked and what information will I need to provide?
For customers who would have no need of a payment break other than due to COVID-19, finance providers are keeping the process simple and it may be possible to fill out an online form or to arrange it over the phone. You are likely to be asked the following types of questions:
- Is the reason for the request due to a COVID-19 impact?
- In what way will this impact on your business?
- What type of facility are you seeking and how will this meet the business needs over the duration of the payment break?
I have a 3 month Payment Break. Can I get a payment break beyond that and is there a date by which I must apply for another three-month extension?
To avail of a Payment Break extension, the original Payment Break must be issued before 30th September 2020. Assuming this to be the case, you do not need to take any action as your lender will contact you prior to the expiry of your 3 month Payment Break to establish if you are in a position to revert to full capital and interest repayments. If you are still COVID-19 impacted and not in a position to revert to full repayments, you will need to advise your lender of your particular circumstances and discuss if a Payment Break extension is the appropriate option.
How long is the payment break extension for?
On expiry of the initial 3-month payment break, you may apply for an extension to the payment break of up to a further 3 months if you are still impacted by COVID-19.
Am I automatically entitled to a Payment Break extension?
Borrowers are not automatically entitled to an extension of their Payment Break. Payment Breaks were provided to customers on the basis that they were COVID-19 impacted, and lenders may offer an extension for a further 3 months only where that situation remains unchanged. If your financial circumstances enable you to revert to full scheduled repayments, then it is in your best interests to do so and your lender will contact you prior to the expiry of your existing 3 month Payment Break to establish your position.
What documents/forms do I need to prepare and submit to my lender if I know I will need an extension to my existing three-month payment break?
Your lender will need to document that your business is still financially impacted due to COVID-19 so they will seek information regarding the nature of the ongoing impact on your financial situation.
What will my repayment options be at the end of a payment break extension?
When a payment break extension is put in place, it is done on the basis that on expiry of the payment break extension that the borrower is expected to revert to full capital and interest repayments. Lenders will make available two options for repayment before the end of the Payment Break extension; namely: 1) Revised Capital and Interest repayments over the remaining lifetime of the loan – reflected in increased monthly repayments over the existing term of the loan; or, 2) Capital and Interest repayments by way of a Term Extension where applicable – reflected in additional monthly repayments over the extended term of the loan. Detail on the implications of the cost of credit of both options will be made available to borrowers.
If at any stage during the payment break extension you are concerned about being able to return to full repayments, you should contact your lender as soon as possible.
Can I cancel my payment break if I no longer need it?
If you find that you no longer need to continue with a payment break as you are in a position to revert to capital and interest repayments, then you can cancel the payment break early by contacting you lender.
What will happen if I am unable to start making repayments again after an extended payment break?
It is important that you start making repayments towards your loan as soon as you are able to do so. Not making full repayments can lead to:
- Your loan being classified as pre-arrears or arrears – this means that a credit assessment will need to be carried out by your lender to determine how much you can pay towards your loan and for how long an alternative repayment arrangement should be in place. Your lender will work with you on a range of solutions that will help you get back on track if this is the case.
- Your credit record being impacted – lenders are required by law to report the status of all outstanding loans to the Central Credit Register (CCR). Some lenders also report outstanding loans to the Irish Credit Bureau (ICB). A poor record on either register may impact your ability to get approval for credit in the future.
Will a payment break or a payment break extension affect my credit record?
Where a Payment Break or Payment Break extension is provided to you on the basis that you continue to be COVID-19 impacted, there will be no impact to the Central Credit Register or the Irish Credit Bureau credit records of borrowers who avail of a payment break as a result of being financially impacted by COVID-19.
Am I eligible for a payment break if my existing loan is in arrears?
Lenders are committed to supporting all borrowers – including borrowers who are already financially distressed and have had their loan restructured. It is advisable to engage early with your lender to discuss what further relief measures can be put in place.
What type of credit facilities are available?
Banks and other finance providers are keenly aware that the cashflow of small and medium sized businesses (SMEs) may be adversely affected by the impact of COVID-19. They are committed to supporting viable businesses in continuing to trade while contingency plans are being implemented.
Banks are offering a range of credit facilities to help businesses deal with the impact of Covid-19. These variously include emergency working capital, short-term loans to address cashflow issues, supply chain supports, trade finance and foreign currency products.
Sector specialists, dedicated teams and contact points are on hand and you should contact your lender to find out what would work best for your business and your particular circumstances – see under Helpful Links.
What type of information will I need to provide?
In the case of COVID -19 affected businesses seeking emergency/additional Working Capital / Term Loan / Temporary Overdraft, there will be a need for some financial information to be provided, but the goal is to have processes that are as straightforward as possible. Finance providers are obliged to carry out a credit assessment which means they will need to gather relevant information. The type of information will very much depend on the level of the facility sought, the nature of the business and the sector in which it is operating.
Typically, the type of information sought may include the following:
- Application details for the credit facility requested
- A cash flow forecast setting out expected cash inflows and outflows
- Most recent financial/audited accounts available
- An up to date list of debtors and creditors
- A Statement of Affairs/Asset & Liability Statement
- Details of all debts held with other finance providers
- Tax clearance certificate/information or details of any agreed tax arrangements
It is important to be realistic when setting out expected cash inflows and outflows, recognising the challenge of operating in such an uncertain business environment. Given the level of uncertainty, it can be a good idea to work out your cashflow based on a few different scenarios such as a) a full return to business by a certain date, b) a partial return to business and c) your worst case scenario.
What will happen if I don’t have audited accounts for the financial year 2019?
The Registrar of Companies has decided that all annual returns due to be filed by companies between now and 30 June 2020 will be deemed to have been filed on time if all elements of the annual return are completed and filed by that date.
The situation will be kept under review and the date of 30 June may be extended depending on the situation at that time. Companies should check the CRO website www.cro.ie for more details.
It is still very much in your interests, however, to have available the most up-to-date financial information. So, where it is possible, if your accountant can finalise your accounts, it is advisable to try to get them completed. Even if still not signed off by your accountant, your 2019 financial accounts in draft form or management accounts could prove helpful.
What can I do to protect my business against fraud at this time?
Businesses have increasingly become the target of financial fraud or scams. Unfortunately, the current situation has given rise to yet more and new types of fraud which aim to take advantage of you and your business at this time of heightened vulnerability. Your best defence is to stay informed, alert and secure; and you can do that by regularly checking our specially-designated website for information and guidance.
Where can I find bank specific information on COVID-19 support for business?
- AIB – https://aib.ie/covid19/business
- Bank of Ireland – https://businessbanking.bankofireland.com/covid-19/supports-for-businesses/
- KBC – https://www.kbc.ie/news-and-press/latest-news-and-press-releases/covid-19-update-a-message-for-kbc-customers
- Permanent TSB – https://www.permanenttsb.ie/covid-19/
- Ulster Bank – https://digital.ulsterbank.ie/business/support/coronavirus.html
What other sources of finance are available?
In addition to the main banks, a number of alternative providers of finance are available. These firms provide a range of funding options for SMEs including invoice discounting/finance, leasing, hire purchase, export finance term loans, deferred loans, merchant cash advance etc.
What Government financial support is available?
A €450m Strategic Banking Corporation of Ireland (SBCI) COVID-19 Working Capital scheme is available to eligible businesses impacted by COVID-19. Loans of €25,000 up to €1.5m will be available at reduced rates, with up to the first €500,000 unsecured. Applications for an eligibility code can be made through the SBCI website which you then provide to your finance provider who will process the loan application.
Future Growth Loan Scheme has been increased by €200m. This scheme will provide longer-term loans from €100,000 to €3,000,000 to COVID-29 impacted businesses over terms ranging from 8-10 years.
SME Credit Guarantee Scheme
The purpose of the SME Credit Guarantee Scheme is to encourage additional lending to SMEs by offering a partial Government guarantee (currently 80%) to banks against losses on qualifying loans to eligible SMEs. The Credit Guarantee Scheme does not substitute for conventional lending that would otherwise have taken place.
On 2 May 2020 the Government announced a €2 billion COVID-19 Credit Guarantee Scheme The COVID-19 Credit Guarantee Scheme is a further development of the existing Credit Guarantee Scheme (Legislation will be required to implement this Scheme).
A €180m Sustaining Enterprise Fund to assist companies with 10 or more employees operating in the manufacturing and internationally traded services sectors. Repayable advance of up to €800,000 available to businesses companies that are unable to access adequate funding from the market, financial institutions or SBCI.
Sustaining Enterprise Fund for Small Enterprise – €25,000 to €50,000 short term working capital injection to eligible smaller companies to support business continuity and strengthen their ability to return to growth.
A Finance in Focus grant of €7,200 will be available to Enterprise Ireland and Údarás na Gaeltachta clients who want to access consultancy support to undertake immediate finance reviews.
Local Enterprise Offices
Local Enterprise Offices provide service supports for small businesses. A new Business Continuity Voucher worth up to €2,500 is available to businesses to assist in preparing short-term and long-term strategies issues to respond to the COVID-19 pandemic.
The maximum loan available from MicroFinance Ireland has been increased from €25,000 to €50,000 as an immediate measure to specifically deal with exceptional circumstances that micro-enterprises – (sole traders and firms with up to nine employees) – are facing. Applications can be made through the MFI website or through your local LEO.
€250 million Restart Grant for Micro and Small Businesses. The Restart Grant is aimed at helping micro and small businesses with the costs associated with reopening and reemploying workers following COVID-19 closures. It will operate through a system of rebates/waivers of commercial rates payments for 2019, with a cap per business of €10,000. Applications can be made online directly to local authorities.
Ireland Strategic Investment Fund (ISIF)
€2 billion Pandemic Stabilisation and Recovery Fund (PSRF) The Ireland Strategic Investment Fund (ISIF) will make available a new €2 billion fund to support medium and large enterprises in Ireland affected by COVID-19.
On 2 May 2020 the Government announced the ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt, The introduction of this ‘warehousing’ measure will require legislation, but meanwhile, details of the support available can be found on the Revenue website.
What support is available to help pay my employees?
The COVID-19 Temporary Wage Subsidy Scheme enables employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer. The scheme is expected to last 12 weeks from 26 March 2020.
The COVID-19 Pandemic Unemployment Payment will be in place for the duration of the crisis. A payment of €350 per week is available from 24th March 2020 to all employees and the self-employed who have lost their job due to the COVID-19 (Coronavirus) pandemic.
Short Time Work Support – This is a form of Job Seeker’s Benefit and is an income support payment for employees who have been temporarily placed on a shorter working week