Alternative Funding Sources
When a business needs to raise funds, getting a bank loan is usually the first option that comes to mind. Banks are not always willing to lend but the good news is they are not the only option. In this short article, we look at four alternative sources of finance:
◆ Peer-to-peer lending
◆ Microfinance Ireland
◆ Enterprise Investment Scheme
This is where digital platforms connect businesses seeking finance to lenders. Examples include Linked Finance which provides loans for Irish SMEs. At the time of writing, the minimum amount you can borrow is €5,000. The maximum is €250,000. The term of the loan is up to 3 years and the interest rate is fixed. The rate is set by the lender and varies from 8.5% to 15% depending on the loan.
Grid Finance is another example. At the time of writing, they offer term loans of up to €150,000 over a maximum of 36 months.
Grid Finance also has a cash advance facility where you can borrow up to €150,000 over a maximum of 12 months. This works with your credit debit card machine with repayments made daily as a percentage of card sales until you have repaid the loan in full.
This is a similar to peer-to-peer lending in that a digital platform connects businesses to potential funders. However, as the name suggests, the funding is sourced from a group of people. On crowdfunding platforms, the rewards for investors are sometimes non-financial. Crowdfunding examples include Fundit, a website for Irish creative projects.
This is a not-for-profit lender providing small loans (€2,000 to €25,000 ) for businesses seeking to start up or expand. Sole Traders, Partnerships & Limited Companies are eligible to apply.
Employment and Investment Incentive
The Employment and Investment Incentive (EII) provides for tax relief of up to 40 percent on investments in shares of certain companies of up to €150,000 per annum in each tax year up to 2020. The minimum investment in any one company in a tax year is €250. The scheme is available to unquoted micro, small and medium sized trading companies, with some exceptions. Investors must hold the shares for at least four years. The purpose of the incentive is to help companies raise finance to allow them to expand and create or retain jobs.
As is always the case in matters where money is concerned, there are terms and conditions to all of these funding sources. For further information on your specific funding needs, please get in touch.