Business Irish

Thursday 14 December 2017

How to bypass the banks and raise dough for your business

In the second of a two-part series, we look at various sources of funds for companies, from the taxman to angels

Banging your head against a brick wall in a bid to raise money for your business from your bank? Don't despair. You could still raise tens of thousands of euro -- maybe even hundreds of thousands -- without knocking on your bank's door.

€80,000 FROM YOUR ENTERPRISE BOARD

If you think your business is in the same league as the National Wax Museum Plus or the cookie dough makers, Kooky Dough, you may be able to raise money from your local enterprise board. Both of these businesses secured grants from their local enterprise board over the last few years.

If you set up your business less than 18 months ago and are creating at least one new full-time job, you may qualify for a grant of up to €80,000 from your local enterprise board depending on the number of jobs you're creating. The grant, which is known as a priming grant, can be used to help pay salaries and other costs such as trade fairs, website development and equipment. You must pay back a third of the grant -- but you won't pay any interest on it.

If you set up your business more than a year-and-a-half ago, you may be able to raise up to €80,000 from your local enterprise board through a business development or expansion grant. You must pay back half of this grant although, again, it is interest-free. Like the priming grant for start-ups, you must also create at least one new full-time job to get this grant.

Enterprise boards only give grants to certain businesses. If you set up a manufacturing business which makes something innovative or a tourism business which attracts overseas tourists to Ireland, you've a good chance of getting a grant. If you sell a service outside Ireland, such as technology, you could also get your money. You're unlikely to get a grant, however, if you're setting up a retail business or a trade firm.

If you're a start-up, you should have a strong business plan showing how your business will make money, advises Eibhlin Curley, assistant CEO with the Dublin City Enterprise Board. That plan must include how many people will buy your product and what profit margin you expect to make. "If you're already in business, you need to have a healthy financial track record, a plan of how you will expand your business and why the funding is needed," she said.

You must prove that your business is, or will be, commercially viable. You must therefore provide evidence that there is strong demand for your product or service. If you have promoters behind your business with a solid business background, you'll also have a good chance of getting a grant.

Expect to get turned down by your enterprise board, however, if your business is insolvent, if you don't have your tax affairs in order, or if you're planning to set up a business which will damage another firm's prospects -- and could lead to job losses.

€250,000 FOR START UPS WITH HIGH HOPES

If you have high hopes for your business and you can persuade Enterprise Ireland that you have the potential to fulfill those hopes, you may be able to raise up to €250,000 for your company. Enterprise Ireland offers equity investment of up to €250,000 to high-potential start-ups, a company which has the potential to create 10 Irish jobs and generate €1m in sales.

If you're not a high-potential start-up, you may be able to raise money from Enterprise Ireland under its Competitive Start Fund. Enterprise Ireland will put up to €50,000 into your business in return for a 10 per cent stake.

You'll only be able to raise money from this fund if your business is in a particular sector, such as cloud computing, games, life sciences and industrial products. Your business must also be less than six years old and able to create 10 jobs in Ireland.

€150,000 JOB GRANT

If you've already running your own business, you may be able to get a get a job expansion grant of up to €150,000 from Enterprise Ireland.

To qualify you must be trading for at least two years, employ at least 10 staff and planning to hire another three people.

€10,000s FROM THE TAXMAN

You may be able to claim back income tax paid on your earnings over the last six years and invest that money in your company.

Under the Government's seed capital scheme, if you start up and work full-time in your own company for at least a year, you can claim back tax paid on income of up to €100,000 earned in each of the last six years. You must invest any tax refund you get as shares in your company and hold on to those shares for at least three years.

€200,000 FROM A BUSINESS ANGEL

If you're a start-up company, you may be able to raise money from a business angel.

The average investment from a business angel, or a group of business angels, is about €200,000, according to John Phelan, manager of the Halo Business Angel Partnership.

"Business angels typically look for a 20 to 30 per cent stake in your company in return for their investment," said Phelan. If you're setting up a company in the ICT sector or a business that specialises in medical technologies or green technology, you've a good chance of raising money from a business angel, according to Phelan.

Just as your business angel will do his homework on you before investing in your company, you too should do your homework on any business angel that's eyeing up your company. "Understand who you're getting into bed with," advised Phelan. "A good way of doing this is by finding out if the business angel invested in a company beforehand."

A FEW MILLION IN ASSET FINANCE

If you are having no luck getting a loan from your bank to buy some equipment for your company, you may be able to raise the money from an asset finance company such as Close Brothers Commercial Finance.

The minimum loan you can get through Close Brothers' asset finance is about €10,000 but you can borrow up to several million euro, said Adrian Madden of Close Brothers.

The interest rate charged on asset finance generally depends on how strong your business is, what kind of deposit you're putting towards the loan and how strong the security is for the loan. Hire purchase and leasing are among the types of asset finance you can get and the interest charged by Close Brothers on hire purchase and leasing is typically between 8 and 10 per cent.

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