Why now is the time for Irish SMEs to embrace alternative finance


By Mark O'Rourke, Managing Director, Ireland

21 May 2019

Why now is the time for Irish SMEs to embrace alternative finance

Despite FDI’s high-profile contribution to the Irish economy, the bedrock of business activity on this island has long been Ireland’s SMEs. Currently, Ireland is home to over 250,000 businesses – with 92% having ten employees or fewer – and the Central Bank’s SME Market Report, released last month, provides some timely insights into the state of the sector as Brexit approaches.

Of course, the economic outlook for these business remains uncertain, with considerable disruption to international markets. Brexit is already having an effect in terms of currency fluctuation, and Irish businesses have also been busy preparing for the disruption the UK’s departure will cause to supply chains.

Indeed, in our recent Q1 SME Confidence Tracker, over half of SME owners cited Brexit as the single biggest challenge facing their business. In order to keep pace with these developments, Irish businesses are frequently seeking out new markets or ways of diversifying their business to reduce the exposure to risk.

But while Brexit – and particularly a hard Brexit – would undoubtedly have serious consequences for Irish SMEs, there’s much that can be done now to ensure businesses have firm financial foundations on which to face the coming disruption.

In particular, and as SMEs ramp up their preparations and look for new ways of safeguarding cashflow, it’s more important than ever before that they consider the range of alternative financing options available to them. The Central Bank report highlights how 15% of SMEs face rejection when applying for funding from the major banks – and this figure is higher again for micro firms.

Equally, gross new lending to SMEs declined by 1.7% in the year to Q4 of 2018, driven by falls in the manufacturing, wholesales, retail, trade and repairs and primary industries sectors.

These figures should give pause for thought to SMEs turning to the major banks, but in many cases they might also be unfamiliar with the benefits of working with alternative funding providers, where SMEs can unlock financing mechanisms that are more adaptable and can be tailored to their business’s needs. Invoice financing, for example, typically offers greater flexibility than an overdraft or loan and is ideal both for improving cashflow and for implementing expansion.

If you find that your business is regularly facing shortfalls due to cash being tied up in late or unpaid invoices, then invoice finance can fill that gap. This funding can then be applied to a wide range of key business needs – everything from investing in infrastructure, business refinancing, international trading or M&A funding.

Irish SMEs will continue to closely monitor events in London and Brussels over the coming months, as the Brexit clock – recently reset to 31 October – continues to tick down. In the meantime, however, those businesses that have broadened their horizons and understand the range of funding options available to them will be best placed to take full advantage of the benefits of alternative finance.

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