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THE SME ENTREPRENEURS I know are a very capable and hard-working group. They are business survivors, especially during the recent challenging times. One of the biggest challenges for SMEs has always been accessing finance when it was most needed.
Businesses need different types of finance at different times to survive and thrive – sometimes that finance comes from the entrepreneur themselves, sometimes from their wider family and friends and sometimes from co-sponsors, investors, banks or business support entities. In recent years, when trading was at its most difficult, the need for finance grew and the strain of repaying existing debt became more acute. Many SMEs found themselves looking for finance at exactly the time it was getting harder to get it.
It seems to me that when it comes to fund availability, the range and sources of funding is extensive and navigating a way through can be quite a challenge. At a minimum, the SME entrepreneur needs to know the following:
The typical SME entrepreneur has not always been sure how best to present their business case to a sceptical banker and too often perhaps opportunities to support business were missed, not fully explored or abandoned. This has resulted in a communication gap between SMEs and providers of finance. Responding to the needs of both, the State has put in place various funding sources and supports – but these funds have been significantly undersubscribed.
To improve the communication problems between SMEs and the providers of finance, the Department of Jobs, Enterprise and Innovation has provided funding to give financial capability training to all SMEs. With bankers doing their own in-house training, this should lead to both sides understanding the other better, and improve SMEs chances of accessing finance.
For the SME to get a better outcome from his engagement with the funding provider he needs the following:
There are many questions which the SME entrepreneur might reasonably ask about the wider process of raising money in the new Irish economy. For example, if the entrepreneur is refused an application for credit is that the end of the line? The answer of course is “no it is not”.
In addition to requesting an internal appeal form the bank, two further options immediately arise. The first is an appeal of the decision to the Credit Review Office (CRO). That office is an independent body specifically established as an appeal mechanism for SMEs who have had their application for finance turned down. In 60 per cent of cases to date the intervention of the CRO has resulted in finance being made available to the appealing SME.
Another option is an application to Microfinance Ireland. This is a body supported by the State, which welcomes applications from people who have been turned down by the mainstream banks. They won’t finance every project, but they do provide finance to people who fulfil certain relatively simple criteria up to €25,000.
To improve their ability to access credit and finance, all entrepreneurs should know what sustainable cash is, how one gets it and how to manage it and mind it, so that they can handle the repayments that borrowings involve. SMEs might also ask: ‘Is it possible to make a profit in a business and still be running up debt in terms of overdrafts, loans or other forms of finance?’ The answer is, absolutely, yes! How and why this happens is something that the SME entrepreneur needs to understand. Converting profitable business to cash is one of the key secrets to survival.
SMEs represent 98 per cent of all the businesses in this country. If we are to grow out of the recession we need them operating efficiently and making money. When it comes to finance, they deserve to get the answers they need. Let’s make sure we help them ask the right questions.
Eugene McMahon is a partner in Mazars and a contributor to the ManagementWorks training for SMEs.
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They need to know that if your business fails, you’re entitled to nothing from social welfare, despite paying HUGE taxes including VAT, PAYE, USC & PRSI.
Government stifle business by not encouraging you to try again.
Don’t get too successful or you will be attacked by your fellow citizens for being wealthy ….Can’t win really!
Two approaches to small businesses here were to leave you with no support if the business failed and to make sure you never started again by our medieval bankruptcy laws.
Is it any wonder that we have had unemployment crises for decades at a time.
You can say or think what you like about Sean Quinn but the fact remains that the powers that be took away his only means of paying back what he owed.
Instead, we chose to take the hit on his debt.
Duncan Bannatyne offered to buy his own loans back at a cheaper rate but his loan book was sold off at a bigger loss.
The ineptitude and incompetency is unbelievable.
Sean Quinn started his business with a quarry and a couple of trucks. He worked hard and used his own business instincts. Apparantly he never trusted politicians and never looked for grants.
Think the trick is to balance it out by spending the company profits. Actually, make your wife the secretary and have a business card made for her. Go wild. Get a good accountant.
Good article Eugine, getting started in business is akin to “pushing molten butter up a hedgehogs backside with a red hot needle” with all the obsticles in place and hands out at every corner.
I tried to expand my business and went after a Nama held premises with a view to a training center.
I hit more brick walls than a JCB driver .
Believe it or not the only person that was of assistance was a bank manager, nobody else (even FAS) wanted anything to do with it and the council wanted 100% rates paid up front.
I wish anybody thinking of setting up business all the very best of luck.
You hit the nail on the head with respect to rates. They are a big number sticking out of the spreadsheet to any business promoter considering a premises and can very easily be the breaking point for not going into business. The government has complete control over rates and stubbornly doesn’t touch them to help startup businesses. Even if they could be deferred for a few years it might help because it’s a big wad of cash to have to fork out on day one, cash that could be put to much better use at the time creating jobs. I think if the question of rates should be addressed.
“What does an entrepreneur need to know when starting out”?
He needs to know that he must never give up.
And ohh that he/se has a better chance of success in another country.
I thought the rates were supposed to be getting reduced now that the have everyone paying the Luppet
You’d be mad to be self employed in this country.
• No backup if your business fails.
• Bureaucracy.
• you pay the same or more tax as a multi national.
• face it, you’re a pie and everyone wants a piece of it.
• swallowed up by the high cost of employing people, rates, energy, utilities and whatever quangos are relevant to your business.
Unless you’re the next potential Apple or Intel, forget it.
Problem is you never know if you’re going to be an Apple or an Intel starting out, unless you’re seriously confident!
I’d say we’ve got some of the best businesses in the world that have never gotten off the ground.
You’ll never be an Apple or Intel in Ireland. Ireland doesn’t think big enough in that regard. We focus too much on getting already established multinationals to set up here which obviously has been very successful but we’re really just renting airtime in that regard.
That’s a good read. I started a small business, received absolutely zero funding from any government supported organisation or bank. Was told by enterprise Ireland that I’d be entitled to a grant if “I was exporting goods and not in direct competition with any other business”. Did you ever hear such bullshit in all your life. If that was my case then I wouldn’t need a grant.
Won’t recommend a start up to anyone. Makes you feel like your bottom of the barrel. Even though I’m doing well now, i would advise against it in this country. There just is no incentive.
If I may suggest, the fact that you’ve done well is fantastic and shows that you didn’t really need financial assistance from banks or enterprise Ireland. That’s what I call true entrepreneurship – turning nothing into something with drive and commitment.
you’d never hear them say “we’ll employ you if you don’t export your profits and are not in direct competition with Irish employees i.e. taking up skillsets that we already have, in abundance!
Thanks Tony. Didn’t cost much to set up on my own, and for that reason I thought I’d get a small bit of assistance. A bit naive maybe but was worth chasing. Heard of a guy recently who started up in the last two years in similar sector to me who got the following:
- €15,000 grant for machinery
- back to work enterprise allowance from social welfare for a few years
- and finally, got to keep revenue from his own business on top of welfare payment which is tax free.
This is what got to me the most. Fair play to him, but how he got it I’m still trying to figure out. Must know a TD looking for a vote or two. Thanks again for the good reply to my comment above.
Well done Trevor it’s good to see people with fresh ideas and energy to start their own bussines I starte my first busunes in 1979 and never looked back.
Things I would say to anyone starting a business is to be careful how you spend your hard earned dosh, listen to politicians but never rely on them, listen to your bank manager he is your lifeline look for grants by all means but when buying machinery search for good s/h rather than pay full wack with tax Most important if you put your home as bank security is to have a realistic business plan with projections. Your business could fail without this.
Good luck mate.
Thanks very much Chris. When I get advice from business owners it really does spur me on. Much appreciated.
Remember this Trevor, every hour that you work is a portion of your live that you can never reclaim. Put a value on everything you do from now on.
Thanks again Chris.
that is excellent advice chris kirk. business plan is the most important thing youll ever do.
Ireland really is a awful place to set up a business, especially now. Really pisses me off because in general we are a hard working, entrepreneurial people but there are so many unnecessary barriers to entry for people.
We’ve become far too reliant on foreign companies which is a dangerous game. There should be far more incentive for home grown businesses.
The best place to start a business is in the head.
“Buy for a dollar, sell for two”, the wire
More like “buy for a dollar and sell for four” Mike, given the cost of doing business in Ireland.
New Entrepreneurs, don’t do it, unless:
1)Sufficient seed capital to sustain the new biz till established.
2) e commerce angle to biz, to future- proof
3) a trusted,experienced biz mentor / advisor / sounding board by your side at all times.
4) Tough as old boots, and able for the usual knocks in business.
Entrepreneurship can be further encouraged in Ireland by enabling easier access to small- scale risk capital. For example, Tax breaks for Private investors in Crowdfunding initiatives could be examined. This system is well developed in USA and UK and needs pushing in Ireland.
Eugene, if you have any sway with Minister for Enterprise…
Cash flow. I know this is said all the time but it is critical. I don’t know how other countries stack up but businesses in Ireland are very slow to pay. You spend an awful lot of time chasing your money and the government and bigger businesses can be the worst.
Government could do something about it but won’t. ISME have been lobbying for years to have something done. Many good businesses have gone to the wall because they couldn’t get paid.
Very true Kieran, a sale is not a sale until it is paid for in full.
I think Irish people don’t like paying almost out of spite!
For me the best business model is where you get paid up front. Dell do this very successfully, as do Apple (iTunes) and Ryanair (I pick Ryanair as they were one of the first to by pass the travel agent and take your money directly). No collection worries if the client pays before they get the service.
Don’t set up down the country
Very tight people down there i must say
You already posted that, you spa.
Don’t set up down the country
Very tight people down there
You set up a twitter account to say that? This country needs more people like you!!!!
That’s dedication I can admire.
Niall look at my name, say it
I didn’t set this up to post about culchies being so tight that they cry out of one eye, i assumed that is a well known fact
*Yawns*
One thing an entrepreneur needs to know starting out is if you are under 18 you don’t need to waste your time chasing your County Enterprise Board – why? You’ll be told: “Sorry, you’re under 18, we can’t help you – as my sons from Donegal Pens http://www.donegalpens.com and the 19 other young entrepreneurs that featured last year on Junior Dragons Den found out! Gives great encouragement I must say to young people trying to set themselves up!
Eoin, while I have a lot of respect for the work of the IDA and Enterprise Ireland, I am very a sceptical of all these County Enterprise Boards and their like. In my experience, I am not impressed with the caliber of the individuals and none of the key people I have met come from an entrepreneurial background. It seemed more like jobs for the boys. That’s just my experience.
I also think that all of them including El have a very constrained brief and your sons were a victim of this. Among other things, they must tick certain boxes with regard to employment possibilities and exports. Snap chat with its 15 employees would never have been funded.
Dont get a Loan, or Grant, if you can help it,otherwise they The Banks) will eventually own your company,or if it goes bust, you will have to pay them EVERYTHING! My advice is……..Try Crowd Funding,Google it,maybe Fundit.com
where people fund your startup,if its small,it doesnt always work, but its another way to try.Example, if you want to record a song, if enought people put money up, and its funded, you could give them a copy!!No investment, at all by them in your business.Have a look.
Two simple philosophies we’ve learned on our start-up journey…
Work Hard….
Get Paid!!!
This is an interesting article. Is it ManagementWorks that offer some training around this topic?
Eugene is providing training on the new Building Financial Capabilities Programme offered by ManagementWorks throughout the country – see http://www.managementworks.ie/business/building-financial-capability-smes for more information.
That no matter what the state is going to ride you like a donkey and when the chips are down and your venture hasn’t quite worked out like you thought youll be left high and dry and excluded from social welfare. In other words its your own stupidity for trying to create employment.
Not too bad
Yes.. it’s work hard, Pop hard,sleep hard, get paid hard and reinvest hard.
The life of a current start up..
And,,, Don’t be fooled into thinking you ‘should take ‘named’ finance.. the interest rates are at the same and higher robbing rates as the banks.. ‘always read the small print’
This is an interesting article. The funding for training that you mention, is that through ManagementWorks?
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