Author: Nick Ashmore – SBCI Chief Executive
The pandemic has severely affected all sectors of the economy and has shown how much SMEs need funding support, now more than ever.
To survive, SMEs will need a strong financial plan to make sure they will have access to the funding they require. This is where the Strategic Banking Corporation of Ireland (SBCI) can help.
Since it started its lending activity in March 2015, the SBCI has already supported over 32,000 Irish SMEs with over €1.7 billion in low-cost, SME-friendly loans and leasing products, helping businesses in almost every sector – food, agri-business, retail, manufacturing, tourism, services, technology and many others – by making finance available at interest rates well below current market rates (e.g. the Future Growth Loan Scheme ranges from 3.5% to 4.5% max).
The SBCI reacted quickly to meet the needs of businesses impacted by the COVID-19 pandemic. Initially, through the provision of an emergency €250 million working capital support and more recently with a further €500 million injected into the long-term finance market through the expansion of the Future Growth Loan Scheme. In addition, the Credit Guarantee Scheme has seen a further €2 billion to support Irish businesses, including those in the farming and fishing sectors, as they continue to respond to the impacts of COVID-19 and other challenges, such as Brexit and climate change.
The SBCI continues to deliver its supports through its bank and non-bank partners, utilising a mix of low-cost liquidity and guarantees.
Based mainly on SMEs’ feedback, the SBCI has identified seven key tips that business owners should follow to give themselves the best possible chance of getting through the COVID-19 crisis, while protecting their revenue and making their businesses as strong as possible.
1. Understand your Cash Flows and Make Them Your Number One Priority
In many sectors, especially those dependent on consumer spending, revenues may have completely disappeared during the pandemic. That creates enormous problems for SMEs that must still meet contractual outgoings, such as existing bank loans, rents or supplier payments. Businesses will benefit from a detailed, independent analysis of current cashflows and incoming and outgoing cash over the remainder of the year. Make a realistic assessment of when cashflows are likely to recover, even if it’s pessimistic.
2. Use Your Advisors - Accountants, Lawyers, Financial Advisors
Your advisors have the benefit of seeing how other businesses in your situation are coping. They offer a chance to learn from others’ mistakes or tailor things that worked well in other SMEs to your own individual circumstances. Accountants and financial advisors will support you in identifying potential financial supports from the State or other sources. They can help you produce the financial documentation necessary to support your application for these supports. Your business deserves the best possible chance to survive. Use the knowledge of your advisors wisely to achieve this.
3. Check Out and Use State Supports
If you’re unaware of the huge range of State supports for SMEs, now is the time to change that. Your business could be missing out on grants it’s entitled to or specialist knowledge than can help it to survive. Accessing State support may be the difference between your business succeeding and failing. As a starting point, the Department of Enterprise, Trade and Employment website is a good source of information on all the supports available.
4. Use Credit Wisely – Especially Lower-cost Credit on Offer from the SBCI
Check out the information here for a wide range of State-supported financing options. Look in detail at the various forms of short-term, medium-term and long-term financing options that are on offer, e.g. overdrafts, term loans, invoice financing and leasing. In addition to the SBCI COVID-19 Working Capital Loan Scheme, additional funding is available through the SBCI’s other schemes, such as the expanded Future Growth Loan Scheme and the new COVID-19 Credit Guarantee Scheme. Talk to your financial advisor or your bank or call the SBCI directly on 01 238 4000.
5. Consider Raising Equity or New Forms of Debt
Over the past 10 years a wide range of new options have become available for sourcing equity investment, with many investment and venture capital funds, including some backed by ISIF, opening for business in recent years. Another option has emerged in Ireland in recent years in the form of new types of debt, such as mezzanine, hybrid or subordinated debt. These types of debt are tailored for businesses or projects that have a higher risk profile than traditional debt, with providers offering to lend in this way in return for returns that reflect the risk.
6. Digitise your Business and Move Online
If you’re not online already, this could be the time to make the leap. It offers opportunities to find new customers both in Ireland and anywhere else in the world. It can take out costs, improve margins and grow revenues. Moreover, COVID-19 appears set to leave a lasting impact by triggering an unparalleled shift to increased working from home and shopping mainly online.
7. Be Ready for Any Second Wave
Hope for the best, but plan for the worst. Now is the time to think about how resilient you can make your business if it needs to function solely as an online provider, or if you have to modify how you interact with your customers, e.g. if you can deliver to customers who cannot come to your physical location to buy from you.
The key to making the best of your options is familiarising yourself with them. The good news is it’s never been so easy to get access to the information you need to weigh up what’s best for your business. Just keep yourself informed - more information available here.