If it wasn’t so awful you would laugh. The Twitter Toddler is hiding in a bunker in the White House, with the lights off, as fires burn on Lafayette Square. Meanwhile, I keep thinking of those final non-responsive two minutes and 53 seconds of George Floyd’s life. Three police officers watched and did nothing. We should be angry but save some indignation for closer to home. Our SME sector which employs more than 1 million people is struggling to survive and we are watching and waiting for a new government more than 100 days after our election. The SME companies gasping for breath don’t have much time and three numbers indicate a fatal lack of commercial awareness.

The first number is 11 million. That is the grand total of euros provided to small businesses in the two months since the government launched its SME main support scheme. Eleven million! It gets worse; a tiny number, 400 companies out of 250,000 in the SME sector, have succeeded in accessing a funding lifeline. Apart from the fact that the support is coming in the form of debt capital with unattractive terms, there is the additional problem that our banks are being asked to take on some of the risk too. This introduces our second number. It is bigger than our first number.

Four billion. Yes, that is the estimate by J.E. Davy and Goodbody Stockbrokers of the euro value of bank loan losses stemming from the Covid-19 crisis. The three banks, AIB, BOI and PTSB, are currently tasked with supporting the government SME support schemes. The truth is they really have too many fires to fight in their existing loan books. The combined loan books of these three domestic banks, outside of mortgages, are in the region of €100 billion. One suspects that 4 billion figure (or 4% of book) from the broker analysts is a little optimistic and you can bet the banks fear the same. So, it is difficult to see how the banks have any incentive to increase their risk at this time of maximum uncertainty. And, here’s the really worrying number. It is much much bigger.

The Central Bank of Ireland as the oversight authority and regulator of the Irish banking system publishes lots of really good data. In a recent report, “Covid-19 and the transmission of shocks through domestic supply chains”, the authors Samantha Myers and Fergal McCann stated that trade credit activity is ‘relatively large’ in Ireland. For illustration, they stated that as recently as Q3 2019 outstanding trade credit liabilities stood at €250 billion. Ireland currently has entire sectors of the economy shut down. Would 10% or €25 billion be an unreasonable estimate of the true scale of the evaporation of supplier/creditor capital?

We will soon find out but two months into this crisis there are three very clear truths emerging. They are as follows:

1. Existing government capital support(not payroll) schemes are not working
2. The expectation that Irish banks will add to risk books is commercial nonsense.
3. The cascading effects of a freeze in trade credit chains are much bigger than current estimates of SME support(but not accessed) required.

The purpose of this article is not meant to be gloom and doom. The creation of awareness is a necessary catalyst to prompt leadership and one can be more hopeful of new thinking from here than from 1600 Pennsylvania Avenue. In fact, very close to home, there are three exciting companies about to raise more than €500,000 on the SparkCrowdfunding platform. Now think, that’s almost 5% of the national total from government in the past 8 weeks! These fund raises are an excellent example of combining a good government incentive (EIIS Tax Scheme), equity capital(not debt), alternative pools of capital(retail investors) and technology(Spark). So, thinking positively, the SME sector can be helped. And, we have more time than two minutes and 53 seconds. But not much more.