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When No = Yes - Find out your funding options

The various sources of lending finance are illustrated by the graph below.



Crowd Funding

Crowd funding has grown in popularity in recent years.The project is funded by raising contributions from a large number of people.The rate paid on the funds is dependent on the risk associated with the project and the demand from funders.Crowd funding is typically used to fund start up ventures and can also be used to provide additional capital for early stage businesses.

Business Cycle

To Fund

Security Required

Risk

Cost

Start up/early stage

Start up costs, early stage growth

No

High

Medium/high

State Agencies

There are a number of State and European backed agencies which have been set up to lend to businesses, these include, Micro Finance Ireland who lend €2,000 and €25,000 to new and existing businesses.The StrategicCorporation Bank of Ireland offers a number of lending products to Irish SME's though is own lending partners, these include working capital loans, leasing and hire purchase products and agricultural investment loans.

Business Cycle

To Fund

Security Required

Risk

Cost

Start up/early stage/established

Start up costs, early stage growth, medium term growth

No/Yes

Medium/high

Low/medium


Working Capital Providers

Working Capital providers finance companies by typically discounting the debtor book (invoice discounting).They can also provide stocking facilities in some cases.There are a number of specialist working capital providers in the Irish market with a number of new entrants entering within the last 18 months.Working capital facilities are also provided by the mainstream banks.This funding is typically provided to meet the working capital needs (stock, debtors) of a business.

Business Cycle

To Fund

Security Required

Risk

Cost

Established

Working capital

Yes

Low/medium

Low/medium


Asset Funding

Asset funding is typically made by way of a lease or hire purchase agreement to fund a specific asset.The asset being financed forms the basis of security for the provider.There are a number of specialist asset providers in the Irish market.Asset funding is also provided by the mainstream banks.

Business Cycle

To Fund

Security Required

Risk

Cost

Established

Asset purchases

Yes

Low/medium

Low/medium

Senior Debt

Senior debt is typically provided where a company is well established and has a sustainable cash flow.In some cases the company may also have accumulated assets which can be provided as security.Senior debt can be provided over various terms depending on the repayment capacity of the cash flow.Senior debt is typically provided by the mainstream banks.

Business Cycle

To Fund

Security Required

Risk

Cost

Established

Medium/long term growth

Yes

Low/medium

Low/medium

Mezzanine Lending

Mezzanine lending can be used to provide additional leverage to senior debt.Mezzanine finance typically ranks after senior debt.Mezzanine funding is more expensive then senior debt, reflecting the risk to the mezzanine provider.Mezzanine providers typically provide leverage in excess of 70% and mezzanine finance is normally used to bridge the gap between senior debt and equity thus reducing the cost of the overall transaction.They may also provide a mixture of senior/mezzanine debt by way of a stretched or uni-tranched facility.There are a number of new SME entrants to the market.

Business Cycle

To Fund

Security Required

Risk

Cost

Established

Medium/long term growth

Yes

High

High

Conclusion

It is important to understand which type of funding is best suited to your business requirements, this will prevent delays and frustration in applying for funding that doesn't match your needs.As your business grows it may use a number of different funding types at the same time.It is important that when applying for finance you provide sufficient information to support your application.



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