Small businesses across the island were adversely affected by the financial crisis of 2008 as the availability of finance contracted and domestic demand shrank.
Despite an overall improvement in the financing environment in recent years, small and younger firms are not only still experiencing greater difficulty accessing finance but are unaware of the range of finance options open to them.
The banks have always been the principle drivers of business finance; however there is now an increasing choice of alternative funding available in the market today.
No matter how ambitious your sales projections are, or how innovative your business, most enterprises need funding. And very often, this is the hardest challenge of all.
Here Grainne Lennon, Funding for Growth Manager at InterTradeIreland, outlines in simple terms some top tips for accessing finance and explores some of the current alternative funding options available to SMEs.
Top tips for accessing Finance
- Don’t just rely on traditional sources of finance
- Clearly define your funding requirement
- Consider the optimum ’cocktail of funding’ i.e. funding from more than one source
- Develop a robust business plan or funding document
- Market the plan more widely
- Prepare for due diligence
- Contingency planning is key – Have a plan B
- Negotiate to secure best terms
- Start looking for funding well before you actually need it
Alternative Funding Options
Leasing and hire purchase allows you to spread these capital costs and in the last 5 to 10 years many new providers have entered the market alongside banks.
Asset Based Lending (ABL)
Invoice discounting - Your debtor book is a company asset and there are multiple specialist companies that will assist you in realising cash flow from this asset. Invoice discounting and invoice trading can allow you to realise up to 80% of your debtor book into immediate cash.
Additional cash flows may be available for those businesses who are asset rich by releasing funds against stock, plant and machinery and property.
Peer to Peerlending (P2P)
Ideal for short term loan financing. This is a non-bank loan given by private funders for an agreed term and interest.
There are many forms of equity investment that allow you to exchange shares in your company for cash and expertise from an investor.
The traditional models are venture capital where a fund invests in your company and business angel finance where a syndicate, investment group or high net worth individual, invest smart money in your company. This type of funding is suitable for early stage high potential companies. Then there is private equity which is suitable for more established companies seeking to grow.
There are also many new equity based solutions, such as Crowd Funding, where a large group of small investors take small shareholdings. This method has less interference in the running of the business. Crowd funding does not always have to involve releasing shares or equity
Reward based crowd funding allows the entrepreneur to pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity
There are many online platforms to facilitate these types of crowd funding
Government Backed Loan Funds
There are also many government backed loan funds including Microfinance Ireland in Ireland or The Growth Loan Fund and NI Small Business Loan Fund in Northern Ireland.
How can InterTradeIreland help?
InterTradeIreland can help you to attract funding for your business, whether you are an established business looking for new growth finance or an early stage business looking for seed funding, Business Angel finance or venture capital funding.
InterTradeIreland’s supports include FREE Funding for Growth Workshops and Clinics, an annual Seedcorn Competition with a top cash prize of €100k, funding of HBAN, the Halo business angel network, an Equity Advisory Service, an annual Venture Capital Conference and a suite of Equity Guides, Hints and Tips.