How to get funding for SMEs in Ireland?

Capital remains an integral part of business growth. Capital is required to finance the growth at every stage, including pre-seed, seed, Series A, B, etc. 

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Although small and medium enterprises (SMEs) contribute highly to the economy, they often need help to fund their businesses. In Ireland, these enterprises generate 38% of the Gross Value Added. As a result, there are multiple funding sources, like SME business loans

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Why is funding for SMEs critical?

Funding SMEs is a worthwhile endeavour for any economy. It proves beneficial in the following two ways: 

  • Startups, a critical subset of SMEs, serve as crucial sources of innovation. Unfettered by outdated systems and conventional strategies, these new players in the market often have the freedom to rethink established norms and break through traditional industry barriers.
  • They can quickly and safely use already proven methods and technologies, which helps them catch up with more prominent companies.

Funding options for SMEs in Ireland

Financial support to SMEs is provided through the following channels in Ireland:

1. SME business loans

Like ordinary citizens, SMEs resort to banks for loans and overdrafts. Since banks typically offer lower interest rates than other forms of finance, this can be a wise option. Banks also allow borrowers to modify their payback terms to accommodate their budgets. Furthermore, obtaining a bank loan is typically quicker and more straightforward than securing funding from angel or venture capitalists. 

However, SMEs must meet specific criteria to be eligible for loans. The first one is the credit score. The credit score shows the history of lending, and a high credit score means that banks will have less risk of borrowing in this case. 

Similarly, banks also analyse business plans in the long run to get an idea of how strong the plan is. This helps banks set the optimum interest rates. Banks offer different interest rates, so thorough market research before finalising one is a must. 

2. Crowdfunding platforms

Another way to support SMEs is through crowdfunding platforms. Businesses can create campaigns on these platforms and set fundraising goals. If they meet the goal, they get to keep most or all of the money raised, minus the platform fees. 

Some famous crowdfunding platforms in Ireland are FundIt, iCrowdFund, and, MoneyCrowd, and many more. However, there is a risk associated with this source of funding. It is not regulated, which leads to uncertainty and may even discourage some investors from pooling their capital in medium and micro enterprises. Thus, you need to strategise well before selecting a funding source.

3. Grants and tax credits

This is a government-backed source of funding. Such initiatives provide financial support based on various parameters like the nature of the project or its location. 

Grants and tax credits are beneficial because: 

  • Financial support: To lessen the financial strain on SMEs, grants and tax credits can be used to purchase equipment, staff training, or product development.
  • Enhanced competitiveness: SMEs can become more competitive than larger rivals by accessing previously unattainable or too-expensive resources.
  • Long-term stability: Some programs offer assistance for several years, strengthening the program and freeing business owners to concentrate on expansion rather than ongoing financial concerns.

4. Angel investors 

These individuals pool money for newly established micro-enterprises. This type of funding appeals to entrepreneurs who want more personalised guidance than venture capitalists or private equity firms typically offer. 

Angel investors have extensive expertise and can thus help beyond providing funds. They can better shape the business strategy. Since there’s no requirement to repay debt, these arrangements offer flexibility and let businesses focus on growing instead of worrying about loan payments. There are many angel networks in Ireland, like HBAN, where SMEs can connect with experienced investors looking to support innovative projects. 

5. Government support for small businesses

The Irish government is leading the way in supporting SMEs. Enterprise Ireland is one government agency that offers funds. These include various schemes like regional enterprise development funds, research and development tax credits, export marketing assistance grants, and startup accelerator programs.

Microfinance Ireland is another option. They offer low-interest loans of up to €25,000 to small business owners who may struggle to qualify for traditional bank financing due to limited credit history.

The Minister for Enterprise, Trade and Employment, Simon Coveney, gained approval for the Increased Cost of Business Scheme (ICOB) in the 2024 budget, a one-time grant designed to assist approximately 130,000 small and medium-sized enterprises, costing €250 million. 

A new Angel Investor Scheme that lowered the Capital Gains Tax Rate to 16% was introduced in the same budget.

6. Lease and hire purchase agreement

Leasing and hire purchase agreements offer small businesses an alternative way to finance their needs. These agreements allow businesses to acquire equipment or assets without a hefty upfront payment. They can be custom-designed for specific needs, helping businesses manage cash flow while accessing essential resources.

While leasing and hiring purchases might seem appealing, they come with costs. 

Monthly payments are often higher than loan payments because they include depreciation rates and interest charges, leaving less money for reinvestment. Additionally, these agreements can last several years, potentially locking businesses into commitments that no longer suit their needs if circumstances change.

However, despite these drawbacks, leasing and hire purchase remain popular options among SMEs due to their accessibility and flexibility, especially for a sole trader. Many suppliers offer tailored packages for startups, providing flexibility and protection in case the venture doesn’t succeed before the repayment terms end.

7. Equity investment

Equity is a buzzword when it comes to funding sources. Here, the SMEs sell some part of ownership to investors and receive financial support. One potential benefit of this approach is that founders retain more control over decision-making compared to having to adhere to loan repayment terms. 

However, it’s crucial to acknowledge the significant risks involved; if the venture fails, owners risk losing the investment provided by backers. Additionally, investors may impose certain conditions before committing funds, so entrepreneurs must thoroughly understand the terms of any agreements before proceeding.

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The question of how to get funding for SMEs in Ireland online and offline is well answered now. Each of the funding sources mentioned has its benefits and setbacks. The onus lies in entrepreneurs’ ability to analyse everything well and choose what suits them best!

Besides seeking funding, SMEs’ can also apply for corporate tax relief. This relief, also known as Section 486C tax relief, reduces Corporation Tax (CT) for the first five years of a business.

You can apply this CT against profits and chargeable gains on assets used in your new business.

A startup business is entitled to relief if its CT due is €40,000 or less in a tax year. If the CT due ranges between €40,000 and €60,000, the business will be entitled to partial relief. 

So, what are you waiting for? Put your business ideas to realism!