Business funding is available – but have a plan and seek advice

As managing director of Focus Capital, Eoin O’Keeffe helps founder-oriented companies through their first round of investments. He sees three main sources of funding as being relevant to his clients: debt, private-equity funding and, occasionally, high net worth individuals and family offices.

“Debt from the banks and alternative lenders is readily available in Ireland as a source of funding. The only downside is, with rising interest rates, this source has become more challenging. All of a sudden this type of debt has become very expensive,” says O’Keeffe.

O’Keeffe has witnessed Irish business become more conservative since the financial crash.

“However, there are a lot of private-equity investors, not only in Ireland but also in the UK and America. We work in many different sectors – medical devices, financial services, for example – and we can match the private equity to the client, matching the skill sets to add more value,” he says.

Bushmills Irish Whiskey explores new territory with “unmistakably different” 14-year-old Malaga cask single malt

---

Sustainability: A whole new set of reporting with potential to be transformative

---

Tools and applications, in common use elsewhere in life, are still not standard in healthcare settings

---

Futureproofing the health system requires a new prescription

---

In Ireland, due to its smaller size there are few specialist private-equity markets. However, in the US there are many to choose from. O’Keeffe calls it “smart money”. But even smart-money investors tend to be hands off.

“They don’t want to run your business but they do have access to specialised talent that might add value to your business. They might have access to CFOs or managing directors that could add strategic value, perhaps in scaling the business,” he says.

O’Keeffe helps his clients figure out which source of funding will work best for their business – and be the most competitive.

“As the middlemen, we can help find the best deals in the market. We can provide scope so that our client should be in a position to meet with several potential funders and, after many conversations, choose the one that best meets their needs,” says O’Keeffe.

While advising clients on which avenue to explore, O’Keeffe and his team also help the client to become “investor ready”.

“We want to ensure that when our clients go to market and the buyer comes in to do their due diligence, they won’t find any red flags or holdups,” he says.

“We’d done a lot of research in the marketplace and have a good flavour of what is out there. A founder business may raise once or twice but we are doing it daily for our clients and can put that expertise at our clients’ disposal. Basically, you get more people working in your team,” says O’Keeffe.

Colm Sheehan, director, corporate finance, at Crowe, views the debt market as the most commonly used, offering a wide range of finance, particularly for SMEs. The market can broadly be broken down into two sectors – pillar banks and a growing pool of alternative lenders.

“Senior lending is the cheapest form of debt and is typically secured from high-street banks,” says Sheehan. “The challenge facing Irish borrowers currently is the lack of depth in this market, with Bank of Ireland, AIB and Permanent TSB being the primary providers for SMEs. It is important that the lending market has the necessary depth to create a level of competitive tension for the benefit of the borrower.”

He adds: “The alternative lending market has grown considerably in Ireland in recent years, with many lenders offering products on an asset-lend or cash flow-lend basis. Loans at this level command a higher interest margin but typically the risk appetite of the lender tends to follow the elevated pricing. There can be scope for these lenders to provide greater EBITDA leverage at risk-adjusted rates of return.”

While most funds are raised through the debt market, raising equity can often be a sound alternative. Equity can also be a means to fund a clear growth strategy that enhances the capital value of a business.

Private-equity investors can add intangible value to the management of a business. They will act as an adviser and leverage their experiences in other businesses to provide strategic direction to yours

—  Colm Sheehan, Crowe

“There is a growing number of private-equity houses operating and wishing to deploy capital in the Irish market,” says Sheehan. “Private-equity investors will have a clear investment plan and will typically look to realise their investments over a medium-term horizon. As such, a business will need to exhibit real growth during that time, either through organic opportunity or acquisitions.

“Private-equity investors can often add intangible value to the management of the business. They will act as an adviser and will leverage their experiences in other businesses to provide strategic direction to your business.”

EY Ireland corporate finance partner Ronan Murray says there are numerous funding options available to Irish businesses, backed by significant amounts of domestic and international capital.

“However, a key challenge is knowing which source is optimal for the company and how to access it,” he adds. “Once we understand client objectives, we seek to connect them with the right type of capital provider.”

EY Ireland corporate finance partner Fergal McAleavey adds: “Depending on the scale, industry and requirements of the business, there is a range of funding options including bank (“senior”) debt, mezzanine debt, crowdfunding, angel investors (EIIS), private equity, venture capital, asset disposals or a sale of the company.”

The labyrinth of funding options available to businesses can be challenging to navigate. In some cases, it can be difficult to identify the appropriate person within a bank or lender to open the correct doors for you.

“A trusted corporate finance adviser will guide you through that process, from preparing a business plan to present to lenders, to ultimately negotiating terms and ensuring an efficient drawdown process,” says Sheehan.

“In terms of preparing for a funding proposal, to provide the best chance of success it is important to prepare robust and defendable projections to illustrate repayment capacity and future profitability.”