FINANCE ACTIVITY TO DATE


Looking at how the CROworks, the process is initiated by bor- rowers through the website, www.creditreview.ie. So far the CROhas worked with 12 cases – in three cases the banks’deci- sion was upheld, in two cases it was disputed, and one case was deemed to require more work by the borrower and bank.The other six are still going through the process. “Twelve is a lownumber; as people needmoreworking capital


to trade into recovery, thismay increase the demand to theCRO. Between nowand the next quarterly report Iwillwork awaywith the two banks to make sure credit is made available as easily as possible to viable businesses and will look at what banks could improve on in helping businesses to provide what’s needed to make a lending decision,” saysTrethowan. His efforts are currently focused on AIB and Bank of Ireland,


which provide around 60pc of themarket supply.Trethowan notes there has been a contraction in the number of other lendersmak- ing loans into the business market.Anglo Irish Bank and Irish


Nationwide have been de facto removed fromthe supply side and there is anecdotal evidence of lack-lustre lending performance in some of the non-NAMA banks. “AIBandBank of Ireland aremandated toworkwith theCRO


but there is nothing to stop the other banks joining the process voluntarily.There is evidence fromcalls to theCROhelpline that businesses that borrowfromthe non-NAMAbanksmay face real difficulties in obtaining newloans for increasedworking capital or newinvestments.Thiswill result in further demands being placed onAIB and Bank of Ireland to provide finance, thus contracting themarket further.” In the last quarter Trethowan has met with various organisa-


tions and institutions, including First Step andTeagasc. “I want to engage with as many people as I can, and in trying


to be equitable to banks and borrowers, show that while banks are part of the problem they are absolutely part of the solution. Unless everyoneworks togetherwewon’t get the best out of banks or the economy,” he says.


‘ONE FIFTH OF APPLICATIONS THAT HAVE GONE THROUGH THE APPLICATION PROCESS


AIB SMALL BUSINESS RECOVERY SCHEME


JohnKelly,head of customer propositions,AIB, says the bank decided to introduce its ‘SmallBusinessRecovery Scheme’on 1 June to help the thousands of viable business customers on its books thatwere under pressure due to falling sales and pay- ment delays. The scheme, with a fund of €500m, will achieve this by


restructuring existing AIB borrowings and providing addi- tional working capital to meet their business needs. It is part ofAIB’s recapitalisation commitment to theGov-


ernment for an additional €3bn in newor additional SME lending in each of 2010 and 2011. “While this is open to all of our 180,000 business customers,


we estimate the scheme is of specific interest to about 15,000. After amonthwe’ve received 50 applications requesting €2.5m in credit.There is a bit of a lead time because of the various items a business needs to produce to showits viability.We are getting two applications a day at themoment andwe expect this to escalate significantly,”saysKelly. He continues: “We knewfromtalking to customers there


was a really significant deterioration in the business climate and theywere experiencing severe cash-flowdifficulties in the past 12months. “In a nutshell,78pc of SMEs experienced a decrease in


turnover in 2009; and 45pc of SMEs experienced a decline of greater than 20pc.As supported byMazars research, the aver- agewaiting period for payment is now75 days,with 47pc of SMEswaiting longer than 90 days.”


FromAIB’s perspective, the financial state of small busi-


nesseswill alwaysmanifest itself in the current account, and Kelly says it sawa lot of companies under pressure. “These businesseswere fundamentally viable.Wewanted to


do something for these businesses thatwere going to be around post-recession;provide themwith a bridge to get themfrom wherewe are nowto that point.” To helpwith cash-flowdifficulties,AIBis offering small


business customerswith existing branch-based current and loan commitments the option to‘restructure’ into a single recovery loan. This ‘restructured debt’will be offered byway of a recovery


loan over an agreed termwith an interest-only option for up to the first two years if required and additionalworking capital facilities. “This releasesmoney that otherwise had to be used for capi-


tal repayments into cash flow,”Kelly explains. “We are offering the option of clearing out a company’s over-


draft and then reinstating it up to 50pc of the original amount or €50,000,whichever is the greater. Itmeans you’re taking the hardcore debt out and introducing a newcredit limit to help newsales in 2010 and 2011.” When applying for the scheme, a borrower has to demon-


strate that the company is viable:when going into the bank, you need to bring in cash-flowforecasts,debtor-creditor profiles, the current status of your tax affairs and the latest set of audited accounts.


VOL 3 ISSUE 3 2010 OWNER MANAGER 25


HAVE BEEN DECLINED, AND A PROPORTION OF THESE HAVE BEEN REVIEWED BY MORE SENIOR STAFF AT THE BANK AND ALSO DECLINED’


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