Bibby Financial Services Ireland has stepped up its funding commitment to small businesses as non-bank lenders look to fill the vacuum left by Ulster Bank and KBC.
The invoice finance firm, which lends against a firm’s trade debts, is committing an extra €30m in SME funding to the Irish market this year in a bid to pick up business from companies in search of new funding options.
The company is addressing what it sees as “cash flow concerns” in the SME sector caused by supply chain and cost inflation, as well as the disruption of switching lenders amid the upheaval in the banking market.
Research commissioned by Bibby found that nearly four in 10 small businesses will require additional funding in 2022, while nearly a quarter say their need for cash flow support is greater than ever.
In addition to dealing with inflation and supply chain disruption, firms are also ramping up hiring and investing in their businesses as the economy enjoys a post-pandemic period of growth.
The funding pledge is the latest bid by Bibby to expand its franchise here as an alternative lender to small firms.
In 2021 it partnered with Permanent TSB to distribute its financing products via the bank’s sales network.
It also signed up to offer trade finance on behalf of the State-backed Strategic Banking Corporation of Ireland, which administers Government lending schemes such as the Covid-19 Credit Guarantee Scheme.
Invoice finance, which is offered by banks and non-banks alike, has been an increasing component of the funding mix for SMEs in recent years.
According to the Irish Asset and Invoice Finance Association of Ireland, companies in Ireland have accessed more than €1bn in capital via the product.
Statistics from the industry body show that debtor days for small businesses have decreased as the Covid-19 crisis has faded, with the average waiting time to be paid at just over 47 days in the first quarter, versus more than 64 days in the worst period of the pandemic in 2020.
But data from the UK, where government Covid supports were withdrawn earlier, suggest SMEs could face increases in bad debts later this year.
Meanwhile, low levels of financial literacy among SME owners is holding back access to funding, productivity and business development, according to a joint project by the Small Firms Association and Skillnet Ireland.
A competence assessment by the initiative, found that a major skills gap exists at the top of small firms when it comes to accounting, risk assessment and financial planning.
The assessment found that SMEs that were younger than 10 years score lower than their older counterparts when measuring financial literacy and analysis, and understanding risk. Those businesses were found to have more difficulty with accessing financing and State financial supports, as did the smallest businesses with nine employees or fewer.
“It is critical that owner-managers of small businesses have up-to-date organisational and financial skills... to implement the necessary changes to adapt to an ever-evolving business landscape,” said SFA director Sven Spollen-Behrens.