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Irish Printer June 2012
Fe at u r e
Legacy Debts – An SME Perspective
While public debate focuses on new jobs, new lending and getting the banking sector working again, the question of old debts is not being adequately addressed, argues John P Eager FCA, chief executive officer, Snap, in this personal perspective on dealing with lenders. I have the pleasure and the challenge (in the current economic environment) of working with 22 separate small businesses in our organisation. The average employment in these businesses is five, including the owner/operator. Our businesses’ main input costs are materials for production
and staff costs. Costs are relatively fixed which include significant capital investment. Like most small businesses, we have restructured our costs in line with the fall in sales caused by the weakness in demand in the Irish economy. Slowly, our businesses are returning to profitability - relative to the current environment. There is a semblance of hope returning after three difficult years of restructuring. The picture painted here, while positive in direction, doesn’t reflect the full position. Public discussion doesn’t reflect the full position either. The focus is on new jobs and new lending and on getting the
banking sector moving again. What is not being addressed - publicly, and arguably in the private meeting rooms of the banks - are the old debts, the borrowings taken on by Irish businesses in better times. Debt levels are high and the approach to getting them repaid is, in my view, off. It is worth noting that many of these old debts were not inappropriately taken out. The loans were for business expansion activities - buying businesses, fixed assets, and investment properties. At the time these loans were taken out it was considered appropriate, indeed (and