The SBCI Covid-19 Credit Guarantee Scheme has been extended until December 2021 which is a very welcome move to allow the pillar banks continue their support for SMEs impacted by Covid.
The pillar banks continue to support their customers via the traditional facilities such as term loans, overdrafts, invoice financing and asset finance. Longstanding customers and larger SMEs typically receive the most support with smaller SMEs tending towards more agile alternative funders
MICRO FINANCE IRELAND
If your business requires a low quantum of funding up to €25,000 then MFI are a very attractive option with the most competitive terms you could hope to achieve. To qualify, you must have less than 10 employees and a turnover not exceeding €2 million.
Crowdfunding continues to grow in Ireland and so too does its credibility. The value of Irish transactions grew 15.9% in 20211 . Depending on the nature of your business, this can be a very business friendly option that allows for psychological “buy in” for your business and its products and/or services. This type of investment often garners strong local support and strengthens a customer base.
Crowdfunding is not only about equity for start-up businesses – there are many examples of existing businesses raising short to medium term debt finance. This leads us onto Peer-to-Peer (P2P) lending.
PEER TO PEER LENDING
P2P lending is the lending of money via an online service provider that essentially matches lenders and borrowers. The notion of cutting out traditional middlemen like banks and brokers is to reduce the overheads associated with banking but to also unlock a multitude of willing lenders that were previously unavailable. These lenders are not restricted to individuals with some savings on deposit but can also consist of more sophisticated investors/lenders willing to loan out their money such as family offices and some institutional lenders (this often allows lenders to bypass layers of regulation).
The products on offer via these P2P platforms are typically what you expect from your pillar bank but they can be much more nimble and quicker in terms of getting your business requirement funded.
While many businesses did not want to publicly display all their company particulars for the purposes of obtaining a small loan, the process of getting funded and the amount of information that is made available is greatly streamlined. While this was once deemed unbecoming for a business or a sign of weakness in terms of banking and financial strength, the popularity of these types of funders continues to grow and no longer carries any stigma.
When it comes to having maximum discretion and the most flexible funding terms, you need to look at professional advisors and financial brokers. The area of mezzanine finance, asset backed lending and private funding is one to approach with caution. At all times, check and double check the bona-fides of the people you engage. Ask around and do not be afraid to ask direct questions.
Private funding is usually the most expensive form of funding, but it is also the most flexible. The risk appetite is typically higher and with the correct advice – it often allows for creative funding solutions that the pillar banks simply will not entertain
While there are many choices and new names appearing with each and every Google search, it is important to remember there are only a handful of true alternatives to pillar banking. While there are many new providers emerging, their longevity is often short lived which only reinforces the assertion that one cannot overstate the importance of trusted financial advice from your accountant or business advisor. If something seems too good to be true, it usually is! You should also be cautious of paying upfront fees and costs without doing some due diligence and research first. Having a contract and terms of engagement (while slowing things down initially) will often save much heartbreak.