25 October 2014

SMES: 7 ways to raise funds without banks

08:02, Philip Connolly

Cash is the lifeblood of any business. Without it, getting any idea off the ground can be tough. While banks may say they are meeting their lending targets, many cash-starved small firms disagree.

If banking finance isn’t an option, how can a firm get the funding together to start a business or expand?

**Here are 7 options for raising capital without the help of a bank manager.**

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**1** **[Enterprise Ireland](http://www.enterprise-ireland.com/en/)**

Ask most startups who has supported them in their first few years and the majority will mention Enterprise Ireland. The state body provides advice and mentoring at an early stage, puts funding into many firms and then helps open doors abroad through its network of offices dotted around the globe.

Every year, Enterprise Ireland picks out companies that it thinks could be 'the next big thing' to come out of the country. Through the high potential startup (HPSU) fund, the agency puts its money where its mouth is by investing in these companies.

Qualifying as an HPSU can be tough, Enterprise Ireland must consider a company to be introducing a new or innovative product or service into the international market.

The company must be less than six years old, headed by an experienced management team and, crucially, be deemed capable of creating at least ten Irish jobs and realising exports of at least €1 million within four years of its foundation.

For firms which are not quite at the HPSU level, Enterprise Ireland provides the competitive start fund. The maximum support available is €50,000 for a 10 per cent ordinary equity stake.

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**2** **Incubators**

For early stage firms looking for seed capital to set them on their way, incubator projects could provide enough cash to prove a concept or get early-stage sales. As Ireland’s tech community grows, so too does the amount of options for entrepreneurs to get a roof over their heads for a few months along with some seed capital.

Anyone looking to set up a digital technology business based on their own research could look at contacting **[NDRC's LaunchPad](http://www.ndrc.ie/launchpad/)**. Based at Dublin's Digital Hub, the NDRC has worked with over 80 digital ventures to date. Run by Gary Leyden, the programme offers mentoring, a workspace and crucial micro-seed investment, normally around €20,000, over a 12-week tailored programme.

A new incubator option in Ireland is **[Wayra](http://wayra.org/en)**. Last year, Telefonica brought its digital investment programme to Ireland, investing in ten Irish start-ups. The programme received more applications per capita from Irish hopefuls than in any of the 11 other countries in which it operates.

Each winner receives an investment, in the form of a loan which converts to equity, of about €50,000 and six months' access to a new Wayra Academy workspace in O2's headquarters in Dublin's docklands.

**[Startupbootcamp Dublin](http://www.startupbootcamp.org/europeans-cities/dublin/)** could also be a option for budding entrepreneurs. Part of the European wide Startupbootcamp programme, earlier this year ten teams took part in the three month startup acceleration program in Dublin. Based only a stone-throw from Google on Barrow street, Startupbootcamp Dublin is run by Eoghan Jennings, a partner with Parklane Capital and ex-CFO of Xing.

**3** **[National Pension Reserve Fund (NPRF) Innovation fund](http://www.enterprise-ireland.com/en/Invest-in-Emerging-Companies/Investors/Innovation-Fund-Ireland/Innovation-Fund-Ireland.html)**

Earlier this month the NPRF announced details of three new funds that it expects will provide credit to small and medium enterprises (SMEs), taking a lead role in the development of the three funds and will be a cornerstone investor in each, to the turn of around €500 million, alongside additional investment from third-party investors.

While the funds are likely to be more applicable to established firms, they could prove a good source of cash to help companies grow or aid them in keeping their heads above water.

The funding are split into three distinct funds, each with a different function and investment partner.

The SME Equity Fund, of between €300 million and €350 million will focus on investing in healthy businesses seeking to grow, including those with overleveraged balance sheets. The fund, which has received commitments from other-third party investors, is operational and is managed by Carlyle Cardinal Ireland in Dublin.

The SME Turnaround Fund, worth around €100 million will invest in underperforming businesses which are at or close to the point of insolvency but have the potential for financial and operational restructuring. The fund is operational immediately and is managed by Better Capital. The London Stock Exchange-listed investment fund, BECAP12 Fund, which is managed by Better Capital, will co-invest not less than 51% of the investment into each transaction with the NPRF providing the remainder. Better Capital will establish a Dublin office from which to source deal flow.

The SME Credit Fund, which is initially around €450 million, will lend to larger SMEs and mid-size corporates and will be managed by BlueBay Asset Management. The SME Credit Fund may also acquire and refinance loans close to maturity where existing lenders are not willing to provide new lines of credit.

**4** **University entrepreneur programmes**

Irish universities have also pitched in to provide support to young firms, particularly those which have spun out of university research.

DCU recently opened their new innovation campus. The college also runs the **[Propeller Venture Accelerator](http://www.ryanacademy.ie/propeller-venture-accelerator)**, established in 2010 with funding of €1 million from Irelandia Investments, with an emphasis on software, Web 2.0, applications, informatics and clean-tech start-ups. The three-month accelerator programme offers €30,000 investment in exchange for a 7.5 per cent equity stake. Start-ups receive mentorship, free office space for four months and a service package with marketing, sales, legal, IP and accounting with corporate partners.

UCD run the **[NovaUCD](http://www.ucd.ie/innovation/)** programme, Trinity College has its own **[innovation programme](http://www.tcd.ie/research_innovation/entrepreneurship/)** while DIT also runs the **[Hothouse programme](http://www.dit.ie/hothouse/)**.

While many of the options on this list are based in Dublin, the New Frontiers programme is Ireland’s national entrepreneur development programme and is delivered at a local level by the Institutes of Technology. Run through Enterprise Ireland, the programme entails training in all areas of business, mentoring office facilities and a €15,000 scholarship to cover full-time participation in the six month course.

**5** **Business Angel Partnerships**

Angel funding deals are facilitated by the national Business Angel Partnership and, in the past five years, have amounted to around €15 million, with the average investment of €180,000.

The Business Angel Partnership, a joint initiative between Enterprise Ireland, Intertrade Ireland and the Irish Business and Innovation Network, favours seed investments.

**6** **County and City Enterprise Boards**

Under the government's action plan for jobs initiative, the local enterprise boards won't be around for much longer, although the details of how they are to be dissolved have still to be ironed out.

Under proposals announced by the government last year, the work of the 35 local boards will be taken on by units in local authorities. A unit dedicated to small businesses will be set up in Enterprise Ireland.

CEBs were established in 1993 to provide support for small businesses with ten employees or fewer. They deal in smaller amounts than Enterprise Ireland and can suit some smaller local businesses looking to get off the ground.

**7** **Venture Capital**

For firms looking to get investment to take the next step, venture capital can often be the best source of funding and Ireland now has plenty of options.

US venture capitalist **[Polaris](http://dogpatchlabs.com/about-polaris/)** invests in seed, first round and early stage technology and life science businesses. The venture capitalist is supporting Ireland's high tech startups with both investments and a shared space on Barrow Street in Dublin called Dogpatch labs.

A new Irish veture firm called **[Frontline Ventures](http://www.frontline.vc/)** plans to offer capital, mentorship and access to a network of people that will help early stage firms build their business.

The Irish Venture Capital Association, which represents venture capital in the Republic of Ireland and Northern Ireland, has a full list of their members **[here](http://www.ivca.ie/about/members-2.html)**.

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