Every business, regardless of size, needs to borrow money from time to time, whether to provide working capital or fund the purchase of equipment, or even to acquire another business. Whatever the objective, taking the time to first identify, and then plan for, the right funding solution is key.
“Small and medium-sized enterprises have a range of options when seeking funding for expansion. The optimal route depends on the company’s financial profile, stage of maturity, and intended use of funds,” says Laura Gilbride, deals partner at PwC Ireland.
She advises clients to develop a capital roadmap that aligns financial and operational key performance indicators (KPIs) over a three-year horizon. “This ensures funding is introduced at the right time to maximise valuation, minimise dilution and safeguard sufficient cash headroom to service debt,” she explains.
For SMEs with strong earnings and cashflow, debt can be an attractive option as it allows founders to retain ownership. However, repayment obligations may constrain growth if not carefully structured.
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“The debt market in Ireland has evolved significantly. Alongside traditional banks, there are alternative lenders, cashflow financiers, and venture debt providers. Each offers different repayment structures, interest rates and terms,” says Gilbride.
“Some instruments, such as interest-only or payment in kind (PIK) facilities, can support growth by deferring cash outflows. Mapping the right debt instrument to the specific use of funds is critical to avoid overleveraging while enabling expansion.”
Next comes equity financing, a powerful tool, particularly where debt capacity is limited or where strategic investors can add value. “Private equity firms can provide both minority and majority investments, while growth equity and venture capital are suited to companies with strong growth trajectories,” says Gilbride.
Ireland also benefits from a robust high net worth investor network, she points out, which can be a good fit for earlier-stage businesses.
“When raising equity, shareholders should aim to secure only the capital required, preserving as much ownership as possible. In cases where funding supports a defined acquisition, equity should be raised against the combined or ‘run rate’ valuation of the enlarged business, thereby reducing dilution,” she cautions.
Ultimately, it’s horses for courses.
“For SMEs, the challenge isn’t simply accessing finance – it’s finding the right type of funding to match their specific business needs, sectors, timelines and cashflow cycles,” says Mark O’Rourke, managing director of Bibby Financial Services.
The first step for any business is to achieve clarity of purpose, whether the funding is required to bridge short-term seasonal cashflow gaps or to invest in machinery.
“While traditional options such as overdrafts, leasing or hire purchase continue to play a vital role, invoice finance can provide a highly flexible alternative for a wide range of needs,” he points out.
By unlocking cash tied up in unpaid invoices, businesses can access up to 90 per cent of invoice value within 24 hours. As sales grow, so does funding availability, ensuring finance keeps pace with the business.
Understanding how and where capital is tied up is equally critical. “Some businesses face slow-paying customers; others have cash tied up in stock or strict supplier terms. Tailored solutions, such as stock financing or supply chain finance, ensure funding is aligned with operational realities, helping businesses maintain stability while supporting growth,” says O’Rourke.
‘Irish SMEs remain ambitious, with 88 per cent confident in their prospects and 91 per cent planning to invest over the next 12 months. Yet many still face challenges in accessing the right finance’
— Mark O’Rourke, Bibby Financial Services
As a specialist lender, Bibby Financial Services offers a range of flexible solutions, including asset finance, export funding and blended funding packages for M&A activity.
“The benefits of working with a specialist provider extend beyond speed and flexibility. Non-bank lenders like Bibby Financial Services are often more willing to structure facilities that scale with growth, respond to seasonal fluctuations or fund strategic initiatives that traditional banks may view as higher risk,” he points out.
Bibby research suggests that 61 per cent of SMEs are exploring management buy-ins, mergers or acquisitions this year, with 28 per cent intending to fund these through invoice finance and 26 per cent via asset-based lending.
“Irish SMEs remain ambitious, with 88 per cent confident in their prospects and 91 per cent planning to invest over the next 12 months. Yet many still face challenges in accessing the right finance – 61 per cent report stable cashflow but a third lack the liquidity needed to fund growth, and 44 per cent feel banks are less willing to lend at the levels their businesses require,” he says.
This is why it’s such good news that Irish SMEs are now served by a more diverse financing ecosystem than ever before, and that businesses are increasingly making use of them.
“There can often be a preference to fund businesses via the limited number of high-street banks operating here, however, Irish SMEs are showing a growing familiarity and comfort with the use of more flexible alternative credit options to fund their working capital or growth plans,” says Hazel Cryan, corporate finance partner at KPMG Ireland.
What’s more, despite the current geopolitical headwinds in relation to international trade, the firm sees “huge ambition” across its Irish SME client base, with continued expansion activities and growth plans.
For those SMEs looking to open new markets, identifying the right funding mix to support it is again a vital foundation for success.
“A funding strategy is unique to an SME’s business operation and shareholder risk appetite. There are numerous short- and long-term debt and equity options to support growing businesses,” says Cryan. “One of the most value enhancing steps an SME can do is to prepare a robust cash flow analysis to support the growth opportunity and ensure the source and structure of funds is fit for purpose for the expansion plans.”
