CHOOSING THE RIGHT FINANCE OPTIONS FOR YOUR BUSINESS In association with AIB

Ann Murtagh provides a comprehensive guide on finance options for business owners.

Ann Murtagh, Business Strategist, AIB

No matter what stage in its lifecycle a business is in, it may need some financial assistance to help meet it’s business goals and potential. The good news is that there are a range of bank finance options open to business owners. The key challenge however is to pick the right ones for your business.

Short Term/Working Capital Finance Options

• Business Overdrafts meet the day to day cashflow demands of running your business.
• Business Credit Cards provide a simple and highly effective way for your business to monitor and control routine expenses.
• Insurance Premium Finance allows you to spread the cost of business insurance premiums over the year freeing up essential working capital.
• Bill Payment Finance can help spread other large one off annual costs over the course of the year, e.g. VAT, Rates, etc.
• Invoice Discounting provides immediate finance on funds tied up in unpaid debt or invoices.
• Factoring/Bills of Exchange Discounting can help improve business cashflow.

Medium/Long Term Finance Options

• Bank Loans allow businesses to purchase fixed assets and pay for them over the period of their useful life.
• Business Leases enable businesses to use assets over a fixed time period in return for regular payments.
• Hire Purchase, which is similar to leasing, allows you to make use of equipment while still paying for it and you can take ownership of the item with the last payment of the agreement.
• Commercial Mortgages are long term finance options that can allow your business buy new premises, refinance its existing buildings or invest in property.

Other Finance Options

As well as bank finance there are other sources of finance and support available to businesses.

Equity
The business owner can invest money in the business him/her self or receive finance from private individuals (friends, family, business contacts, venture capitalists, etc.) in exchange for stakes in the company. The cost of outside investment is that ownership, and possibly control, is spread over more parties.

Venture Capital Fund
This can provide money for investment in innovative enterprises in exchange for a stake in the enterprise. The expertise and advice of the venture capitalists is also at the disposal of the business.

State Suport
Enterprise Ireland works with clients to assist them to compete and grow. They also co-invest with the private sector in the development of venture capital funding.

County & City Entreprise Boards provide financial assistance to support the start-up and expansion of small local businesses employing up to 10 people. They offer capital grants and redeemable preference share investments of up to €75,000, employment grants of up to €7,500 per additional employee, feasibility study grants, advice, information, training and mentoring services.

The Business Expansion Scheme (BES) gives income tax relief to those who invest capital in qualifying Irish companies thus enhancing the ability of companies to attract outside investment. The Seed Capital Scheme is an expansion of the BES, which provides a refund of tax already paid by an individual who sets up and takes employment in a new qualifying business.

In the current Irish market there are clearly multiple choices for the business owner looking to raise finance. The type and amount of finance that can be raised will be determined by the creditworthiness of the business, the purpose for which the money is required, the risks associated with the business, the collateral available and other such factors. Professional advice should be sought before committing to using various forms of finance.