Client News > Release

12-04-2010

Businesses Encouraged to Seek Alternative Access to Funds

Lack of Funding Will Not Improve in Short Term – CPA

12th April 2010: Businesses seeking access to funds are being urged to look at alternative sources of income in light of the liquidity crisis facing the Irish banking sector.

Mr. John White, President of the Institute of Certified Public Accountants is encouraging small and medium sized enterprises to think outside the box and identify alternative sources of income, as the current lack of funding evident in Irish banks is unlikely to improve any time soon.

According to White the critical issue facing many previously viable businesses is access to and drawdown of working capital finance. "It is alarming to note that in a recent survey of CPA practicing accountants almost 80% of respondents had witnessed a viable business getting into trading difficulties due to a lack of credit from their bank" said White.  Our members working with a wide range of clients across all sectors confirm the anecdotal evidence that a lack of credit is a significant issue for our economy. Clearly, the challenge facing both the Government and the banking sector remains considerable.

As business owners look to alternatives, Business angels are becomingly an increasingly important source of finance for new and growing enterprises, as many venture capital investors are not in a position to accommodate smaller deals. A recent report from the Irish Venture Capital Association (IVCA) showed that 86 technology companies successfully raised funding during the third quarter of 2009, up from 64 in the same period during the previous year. This would suggest that there still exists a range of investors looking for investment opportunities in Ireland.

Ireland has a strong track record in entrepreneurism, but the reluctance of banks to provide working capital finance has stymied the spirit of innovation in the economy. White explains how business angel investing can reinvigorate this vital area – "Angel investors can energize a business by providing investment in the early stages, with many angels typically investing sums of between €50,000 and €250,000." 

Companies that typically secure investment have been in business for 3-5 years, have a well defined product or service and an existing customer base. Often they are looking for financing for the next stage of growth – be that in expanding into a new market, developing a new product line, etc. This year, there have been a number of cases in the of angel investors putting forwards funds for very early stage - i.e. pre-revenue – enterprises, which indicates there remains a strong pool of possible investment financing in Ireland among private individuals, despite the fact that it is a high risk, high reward activity.

“CPA Ireland has strongly advocated the need for government support to assist our entrepreneurial sector – however in the absence of such assistance businesses are going to have to row their own boat if new business and growth of existing businesses in the SME sector is to be sustainable”. 

ENDS