Fifth of SMEs using Covid payment breaks needed additional support

A fifth of small businesses that got loan disruptions during the Covid-19 economic crisis needed additional support or fell into arrears.

And just under half of SME payment breaks reverted to full payment on extended terms, and a third to existing terms, according to a new report from the Central Bank.

The report also found that around two-thirds of all SMEs in Ireland saw a drop in turnover, with a lot of losses, and “further losses are expected to accumulate until the pandemic recedes. “.

Banks offered payment breaks last year to mortgage borrowers as well as businesses, and the report is the first to shed light on the situation for SMEs since the end of automatic payment breaks.

The number of business bankruptcies in Ireland, as elsewhere in Europe, has not increased during the crisis so far due to the billions of euros the government has injected to stabilize the economy.

However, many economists say the number of business bankruptcies will inevitably increase as business supports are removed, as the vaccine rollout will help reopen the economy but expose the many businesses that will not survive.

The Central Bank found that new loans to SMEs last year were down 20% from the previous year.

“Payment breaks were used extensively for lending to SMEs in the Republic of Ireland through 2020, with around a quarter of debt balances at the end of January 2021 having received this support,” said the Central bank.

Irish SME loan applications fell slightly in the six months to the end of October, despite an increase in the rest of the euro area.

Central Bank Deputy Governor Sharon Donnery said that “monetary, macro-prudential and micro-prudential policies have complemented each other so that the financial system has worked to absorb rather than amplify the shock.”

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