An interview with Derek Butler, CEO of Grid Finance and Co-ordinator of SME Recovery
Founder and CEO of GRID Finance, Derek Butler also set up the SME Recovery steering group to campaign for better support for Irish small businesses as they recover from the Covid-19 crisis. Prepaid card provider Soldo discusses why there is still much more work for the government to do, and why the economic recovery won’t revolve around Ireland’s historical reliance on exporting and immigration
A €15billion bailout, a compensation fund to cover the losses incurred from the Covid-19 crisis, and a deferment of rates until 2021. Those are just a few of the steps the SME Recovery steering group is campaigning the Irish government take in order to protect the sector in its National Small Business Recovery Plan.
“In my own business, we saw firsthand the economic and commercial impact of the Covid crisis on small and micro businesses,” founder of the group, Derek Butler says. Derek is also the CEO and founder of GRID Finance, which specialises in providing SMEs in the retail, hospitality and services sector loans of up to €100,000. “Small and micro businesses don’t carry very much cash. They carry very little equity and reserves on their balance sheet. They simply don’t have the financial resilience (despite their great fortitude and psychological resilience) to withstand a crisis of this nature, whereby their businesses grind to a halt very suddenly.”
A survey by SME Recovery Ireland has found small businesses in the country have suffered average losses of €154,000 each since lockdown began, and 8% of SMEs have permanently closed. Almost all (90%) have seen a reduction in revenue. The SME sector accounts for 99.8% of all active enterprises and 65% of total employees in Ireland, so these are not insignificant numbers, Butler says. “There’s an awful lot more work to do if we’re going to make sure our recovery is reasonably short and comes with much lower levels of unemployment [than is anticipated].”
There has been “huge momentum” since the National Small Business Recovery Plan was released in early May, he adds. “It’s been really successful in putting small businesses high on the agenda in terms of policy response to this crisis.” But there has been criticism that state measures so far, such as the €250million Restart Grant, which provides up to €10,000 to micro and small businesses, and the Temporary Wage Subsidy Scheme, do not go far enough. Butler says comparisons to other EU countries such as the UK, France, Switzerland and Denmark have shown Ireland’s response is lacking.
“Most businesses are only qualifying for €3,000-€4,000,” Butler says of the Restart Grant in particular. “That is immaterial in terms of what’s needed in the small business sector. We’ve evaluated losses of around €10billion that need to be compensated as a result of the Covid crisis. That’s a capital hole that just doesn’t go away.” He’s hopeful new steps will be announced soon, particularly now the Irish coalition government has come to an agreement about power sharing, more than four months after the general election was held in February. “There was a €6.5billion programme announced in early May – only a small fraction of that has actually been utilised,” he adds. “That is partly due to the fact we were missing a government for a couple of months … but really the main reason is that the programmes were not designed knowing the type of crisis this is and the reality of being a small business owner.”
Butler set up GRID Finance in 2013 to challenge that established financial sector, after spending time working in international development in Uganda and Haiti. The team of nine is split between offices in Dublin, Limerick and Portugal (where their technology team is based), and lent just over €10million to SMEs in 2019. Butler expects that to double this year. “We’re still a small, niche player, but I think quite a high impact one,” he adds. “What we’ve seen, particularly in the last couple of months with government funds that have been channeled through traditional banks, [is those organisations] really struggle to help micro and small businesses. That’s what I’m really passionate about.”
The National Recovery Plan is intentionally sector agnostic, with support from 26 representation bodies, including the Construction Industry Federation, the Hair and Beauty Industry Confederation, Ireland Active, the Irish Hotels Federation, the Vintners Federation of Ireland and Retail Excellence Ireland. “What we’ve advocated for with the government is that there is a sort of a horizontal, pan-sector response to the SME distress. And then there’s targeted sectoral responses for the sectors that are the most affected,” Butler says. “I think that’s really important because historically, we’ve experienced one sector effectively [being] played off against the other because there’s a fixed pool of resources [on offer]. And often whoever shouts the loudest gets the most help.”
This is a very different crisis to the financial crisis of 2008/9 and requires a different response from leaders in Ireland, he adds. “Our greatest global trading partners are equally if not more affected by the virus, and I think we will enter a period of increased nationalistic economic positioning with our trading partners. So it means that a lot of our traditional approaches to economic recovery, which is export and immigration, will be neutralised. We have to put the onus back on small and domestic businesses to drive that recovery.”
That’s better for the environment too. While Covid-19 has been devastating to many, it has provided a moment to pause and reimagine what the future should look like. Butler believes it’s an opportunity to be proactive on the green agenda, and one that – if ignored – will lead to more crises of this nature. “These systemic crises are coming thicker and faster. There has to be a reframing and reformatting of our economic system to allow for lower impact on our environment. There is no doubt that our economic system is unconducive to solid environmental goals.” That’s not something Ireland can influence on its own, he admits. “[We] are a small country and have a limited ability to influence that at a domestic and international level … Until [the US, China, other large emerging markets] change, we’re likely to just hit another wall.”
But he’s optimistic for a future where small businesses will be recognised for the contribution they make to the economy, and supported to thrive. “What I’d like to see the government do is to really look at small businesses as a collective, see their importance, and then have very specific policy action associated with them. If you’re a small business owner trying to run a business in a rural community, you’re probably providing a little bit of employment and supporting your local football team. You deserve special treatment because that’s a really hard thing to do.
“Five or seven years from now, we’re going to see a very different, much more digital small business sector,” he adds. “I’m hopeful if we continue to have positive policy results with our actions, it’ll be a better capitalised sector and that the real importance of small businesses will be recognised in our public discourse.”