Businesses seeking large loans are warned that rising energy costs could affect their ability to get a permit.
Hoses in sectors that rely heavily on high energy consumption are likely to be hit the hardest.
While the 2023 budget announced businesses could demand a payment of up to €10,000 to help them with energy bills, some fear that this may not be enough as they are currently dealing with bills worth tens of thousands of euros.
It comes as homebuyers are now finding it harder to get mortgage approval due to the increase in the cost of living.
Business owners currently seeking loan approval told independent.ie how they were asked to provide details of their energy costs as part of the risk assessment process.
Rising costs mean lenders are now stress testing borrowers to assess their ability to keep up with loan repayments.
Banks say they review applications on a case-by-case basis.
A Bank of Ireland spokesman, when discussing a loan application with a company, said: “The Bank takes a case-by-case approach in discussing current and future energy costs, depending on the materiality of energy costs in the context of the company’s overall cost basis”.
Permanent TSB also said it evaluates all applications on a case-by-case basis “to ensure affordability for the customer going forward.”
AIB said it has a responsibility to ensure a loan is sustainable for “our client and the bank” but did not clarify whether energy costs are factored into applications.
Although the budget provides some relief for business owners, closures have still been announced in the aftermath due to rising costs.
The owners of Cistín Eile, a popular restaurant in the town of Wexford, said it was no longer profitable to keep the business going after 12 years.
Chef Warren Gillen said: “It is with a heavy heart that we have made the decision to close due to crushing energy costs, the cost of by-products and a lack of trained, motivated staff, to name a few reasons.”
The most important relief for businesses on the budget was the introduction of the Temporary Business Energy Support Scheme (TBESS).
The program, operated by the Revenue Commissioners, will compare the average unit price for a company’s electric utility in 2022 to the average unit price for the same period last year.
Companies can only claim increases over 50 percent of the previous year. Once this threshold is exceeded, companies can apply for 40% of the increased amount, subject to a monthly cap of €10,000.
However, hospitality and retail businesses, which use a lot of energy, believe more price hikes are on the horizon.
Neil McDonnell, chief executive of the Isme group of companies, said some were now looking to reduce working hours and close at quieter times of the week.
“Companies will fall broadly into three classes. There will be those who can absorb the costs, there will be bettors who can pass the costs on, and then there will be those who cannot pass the costs on,” he said.
“Typically, professional services won’t go under because of bills, but food, hospitality and manufacturing businesses will be under serious pressure because of the significant costs involved.
“What we’re hearing is that companies want to cut hours and cut days, and that shows the mindset of a lot of small businesses.”
Retail Excellence, the largest retail advocacy group in Ireland, welcomed the government’s intervention in the energy crisis with targeted support.
Chief Executive Duncan Graham said that while many people will have more money to spend, “it remains to be seen if this will be enough for many businesses that have been crippled by rising costs”.
https://www.independent.ie/business/irish/soaring-energy-costs-may-impact-loan-approval-businesses-warned-42028170.html Rising energy costs may impact credit approval, companies have warned