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Advantages and Disadvantages of Bank Loans for Irish SMEs

Ciara Battigan

The Irish business landscape is constantly changing. Every industry is awash with new competition, especially in the financial sector, and particularly in the area of business loans. Today, the funding opportunities for SMEs are vastly different compared to when traditional banks were the only players in the market. 

Irish SMEs looking to take out a traditional bank loan can quickly find that there are many challenges to overcome. These can range from stringent eligibility criteria to long processing times.

Below, we explore financing options available in Ireland that businesses can choose from as safe and reliable financing alternatives.

Why Seek Alternatives to Bank Loans?

Traditional bank loans available to SMEs today come with limitations that may not suit the financial needs of an Irish business.

  • Term loans for example, have a much higher interest rate than alternative financing fees. Interest rates can also vary over time, which could be difficult for some businesses to cover.
  • Predetermined repayment dates and amounts can be tricky. As well as that, traditional banks charge excessive fees for late and missed payments.
  • There are extra fees that come with traditional business loans that can make it hard to determine the overall repayment amount.
  • Banks require SMEs to explain what the loan is for, there must be a specific purpose.

Financing Alternatives Available to Irish SMEs

Irish SMEs have a variety of financing options to consider when seeking to fund operations, growth, or expansion. Key alternatives include: 

Government Grants

Any Irish-based small or medium-sized business owner should check to see what types of grants are available from the government. There are a wide range of specific national and local funding mechanisms in Ireland that are there to help SMEs with certain funding issues.

  • Enterprise Ireland is a national option, with many matched funding grant opportunities listed across a wide variety of sectors.
  • Location specific grants can be obtained through County Development Companies, or through support programs which can be EU funded.

Invoice Financing

Invoice financing is a way to borrow against guaranteed future payments that are late coming in. Long-term subcontract tenders often have this issue and businesses which deal in them can find that borrowing against them is a great way to solve cashflow issues.

Peer to Peer and Crowdfunding

Niche options also exist such as peer-to-peer lending or crowdfunding. These offer businesses the ability to ask for a small amount from a lot of people, or to gain investment from like-minded investors who are looking for a new and exciting opportunity.

Venture Capital and Angel Investors

Venture capital and angel investors are also available to Irish SMEs. However, there are drawbacks to these options, including that equity in the business is often a requirement. 

There can also be clauses which allow for the complete takeover of the business if the business doesn’t maintain expected income or if it cuts into the dividends that the investor believes they will receive. 

There are a number of hard-line clauses in these agreements which should be seriously considered before agreeing.

Grid Finance, the Leading Alternative

As listed above, there are plenty of alternative short term business loans available to Irish SMEs. However, we’ve yet to mention the leading option, a merchant cash advance from GRID Finance. 

Here are a few examples why Irish SMEs would be better off talking to us for their business lending needs.

  • GRID Finance products make funding more accessible by requiring less paperwork than a traditional bank and providing loan approvals in 48 hours.
  • The simplified application process is stress-free and we don’t require you to tell us the purpose of that loan. You are free to decide on how best to use the money to benefit your business.  
  • A Flexible Repayment Loan from GRID Finance provides businesses with financing options that offer adaptable repayment terms. This type of loan is designed to align with the cash flow cycles of a business, allowing for varying repayment amounts based on the financial performance and revenue of the business. 
  • GRID Finance offers a rolling credit facility. This means that the borrower can top up the loan without applying for a new one, as long as the previous loan has been fully repaid.
  • You are charged a daily rate based on that day’s sales. Once we receive a read-only copy of your business bank statement, we create a daily rate and then ongoing repayments are made in line with what you can afford to pay.
  • There are no late or hidden fees with the daily repayment method, and it allows the loan to be paid back over.

We’re Here to Support Your Business

If you’re looking for advice or further information on business loans from GRID Finance, please contact our friendly customer support team today and we’ll be happy to assist you on your funding journey.