Icelandic Businesses Still Waiting for Loans Promised by Government Skip to content
Photo: Golli. Finance Minister Bjarni Ben presents the government’s third economic response package, April 2020.

Icelandic Businesses Still Waiting for Loans Promised by Government

No Icelandic companies have received loans via the Icelandic government’s COVID-19 response package, RÚV reports. Three months after the government announced state-backed loans for struggling businesses, banks have yet to make them available. The government also announced it would help businesses pay severance packages two months ago, but an application for the initiative is still not available, though the deadline to apply passed last week.

Since late March, the Icelandic government has presented three economic response packages intended to mitigate the effects of the COVID-19 pandemic in Iceland. The packages represent a collective investment of more than ISK 350 billion ($2.5 billion/€2.2 billion), but some of the largest measures have yet to take effect. These include so-called bridging loans for larger businesses, to be administered through banks, as well as loans available for smaller businesses through island.is, the government-run public services website – neither has been implemented.

Tourism Companies Struggling to Pay Salaries

Companies in tourism are particularly hard-hit by the drop in international travel that the COVID-19 pandemic has caused. “It of course has a very negative effect,” stated Jóhannes Þór Skúlason, Managing Director of the Icelandic Travel Industry Association (SAF). “There are companies that have been dealing with no income for just about three months and they desperately need financial help.”

Most Icelandic workers are guaranteed a three-month severance period thanks to their collective agreements. In April, the government announced that businesses could apply for assistance with severance pay costs from May 1 – but the application portal has yet to be opened, although the deadline for applications passed on June 20. “And then you’re coming pretty close to the goal being jeopardised,” stated Jóhannes Þór. “Because the goal was to help businesses manage salary payments through the termination period since they didn’t have money. So it’s very difficult for the vast majority of companies to finance payrolls at the turn of this month. That is a major concern in my opinion.” The Tax Office told RÚV that efforts are underway to open the application portal as soon as possible, and the application deadline will be extended.

Minister of Finance Bjarni Benediktsson stated that there was nothing more the government could do to speed up the availability of bridging loans, as “the ball is in the banks’ court.” As for the smaller loans available through island.is, Bjarni stated that preparations were nearly complete and it should be possible to process applications within a few days.

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