Irish SMEs focus on growth

Irish SMEs focus on growth

Close Brothers research suggests many Irish businesses are excited about their growth potential – but they will need to be imaginative about the best ways to finance future success.

The year ahead may be fraught with uncertainty, with so many political and economic storm clouds gathering, but many Irish businesses are optimistic about their prospects. Almost a third expect their company to grow over the next 12 months according to the latest quarterly Close Brothers Business Barometer.

However, many need solid financial foundations on which to construct their future growth plans – funding for day-to-day operational needs, but often also capital to help them move forward. Research suggests many SMEs aren’t aware of all the funding options open to them – 56% are not aware of any alternatives to traditional loan and overdraft facilities from the high-street banks.

Too few don’t know what their options are which may mean they miss out on funding solutions that are better suited to their business needs than traditional financing arrangements. Almost two-thirds of firms in the research haven’t heard of asset finance; amongst the remainder, almost half say they have only a limited understanding of how asset finance products work. Similarly, SMEs confess they wouldn’t know where to turn to for finance if they had to find funding for a strategic event such as an acquisition. That needs to change, for ambitious businesses must cast their nets wide for funding solutions to facilitate their growth plans. Even today, banks constrained by increasing regulation on the capital they must hold against loans have not been able to return to the lending practices of the pre-financial crisis era; 6% of firms in the Close Brothers research say they have been declined access to finance by a bank in the last six months.

This is not to suggest that asset finance is a solution only suitable for companies that have not been able to secure funding elsewhere. While asset finance certainly has helped plug the funding gap left by the banks’ retreat, it’s not a last resort. Indeed, for many growing businesses it has clear advantages over other types of arrangement, whether the asset in question is receivables, inventory, property or plant and machinery, and whether the requirement is to boost cash flow resources or to release working capital for investment or even a corporate transaction.

The current state of confidence amongst Irish SMEs suggests there will be no shortage of firms with such requirements; many are sanguine about the UK’s vote in last year’s referendum to leave the European Union. Hiring intentions, for example, are positive, with 43% of firms saying they plan to take on new staff in the next 12 months; and 21% of firms are optimistic about the new trade opportunities Brexit will offer.

Such optimism amongst Irish businesses is welcome. But it is crucial firms have access to the finance required to realise their ambitions – and that they explore the full range of possible options for funding their growth. 

All figures, unless otherwise stated, are from a GMI survey conducted April 2017. The survey canvassed the opinion of 900 SME owners and business managers from several industries across the UK and Ireland on a range of issues affecting their businesses. 

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