Finance for Growth Workshop - Enterprise Ireland...– How much money it needs to fulfil its plans...
Transcript of Finance for Growth Workshop - Enterprise Ireland...– How much money it needs to fulfil its plans...
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Finance for
Growth Workshop
Oct 18
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How we can help
Classification: Green, Amber, Red, Purple (delete as appropriate). 2
Branch network
250 branches in
Ireland
Ireland’s
number one
business and
corporate
bank*
Lending Reach
Lending Reach
We provide more
than 50% of new
SME / Agri lending
to the market*
Dedicated
Business and Agri
Lending Advisers
Community
Support Extensive
Enterprise
Programme helping
you to network and
find new customers,
suppliers and
partners
Thinkbusiness.ie Free
guides, tools, templates
and advice offering real
commercial value
Dedicated Business
Startup phone support
team 0818 200413
24 month Business
Startup Package
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Objectives of the Clinic
To help you understand how our small business lending application process works
To explain clearly the key pieces of financial information we require from you
To look at the different types of security that may be considered as part of the
application
To familiarise you with Government initiatives that assist in facilitating the availability of
credit to the SME market and which are fully supported by BOI
To look at some alternative non bank lending sources
To inform you of the services and supports available from Bank of Ireland
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The Clinic Content – Key Elements
The Business Plan Credit Applications Financials
Purpose and Use
Content
Key Questions - Promoter &
Purpose
Information Required and Why
Security
Why it is needed
Types of Security
Seed & Venture
Capital Credit Review Office
Funds Delta Partners
Kernel Capital
Government
Initiatives
SBCI
Credit Review Office
Credit Guarantee Scheme
Microfinance Ireland
Local Enterprise Office
SME Online Tool
Balance Sheet
Profit and Loss Account
Cashflow Statement
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Business Plan – Purpose and Use
The purpose of a business plan is to: – Establish the fundamental viability of the project
– Document a plan for the business
– Act as a yardstick for measuring progress
– Communicate plans for the business to external audiences
A business plan summarises the following points about a business: – Where it has come from
– Where it is now
– Where it is going in the future
– How it intends to get there
– How much money it needs to fulfil its plans
– What makes it likely to succeed
– What threats or disadvantages may arise along the way and how they can be
overcome
– The ability of the business owner to implement and deliver the plan
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Business Plan – Content
What Constitutes a good Business Plan?
Your Business Plan should contain the following sections:
Background and description of the business
Management and organisational structure
Market research and marketing plan
Channels of distribution and Sales Management
Operational plan
Financial plan
Points to note:
Business plans need to be realistic, not overly optimistic
Ensure key risks/dependencies are clearly called out
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Credit Application
Financial information required by the bank:
Up to date Financial and Management Accounts
Cashflow forecast and working capital requirements
Financial projections
Confirmation of current tax status
Personal ‘Statement Of Affairs’ – which sets out the financial position
of the owner
Any other financial information deemed necessary to that particular
application
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Why we seek financial information
Primary focus when analysing financial statements is to establish if repayment capacity exists at present and is likely to exist throughout the period of the borrowings
It helps to quantify the level of risk attaching to existing or proposed borrowings
While not the sole indicator of future performance we will review historic financial and trading figures as part of the application
We also seek financial forecasts to identify future revenue streams
What we are really assessing is the business’ ability to service the debt and ability to do so over the term of the loan
Stress testing will reflect the robustness of the business repayment capacity against future increases in interest rates
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Financials
The Balance Sheet is a point in time statement of wealth/net worth
In essence the balance sheet shows the Assets and Liabilities of the Business on that day, and is of most use when used in conjunction with other financial information
The Profit and Loss Account shows how much profit (or loss) the business made in a given period (usually a year)
Profitability does not always mean liquidity as cash can be absorbed by:
Working Capital and/or
Capital Expenditure and/or
Excessive Drawings/Dividends
The Cashflow Statement is used to report the cash generated and used by a company during a specified period
Cashflow is the life blood of the business and many cases of business failures have been as a result of ‘running out of cash’
Managing the cash cycle in the business will ultimately determine whether the business has the capacity to service a debt
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Security
Level of security dependent upon:
Extent of the exposure
Type of facility provided
Term of facility
Borrower’s own cash input
Bank’s evaluation of the level of
risk involved
Main Security Types:
Land – Fixed Legal Charge
Life Policy
Lien on Deposits/Cash Cover
Personal Letters of Guarantee for
Limited Company debt –
demonstrates owner’s
commitment
The Bank takes security to mitigate risk but the most important question is
whether the customer can repay the loan
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11
1. Strategic Banking Corporation of Ireland
The SBCI is Ireland’s national promotional finance institution. Their stated objective is provide financial supports to Irish SMEs and ensuring the efficient use of available EU resources, either directly or as a service provider. Current schemes include;
SBCI* On-Lending; low-cost funding (0.4% discount) to SME’s and Agri borrowers.
SME’s; SME DeMinimis SBCI Scheme; purchase of machinery, business premises & working capital
Agri; Agriculture Investment Loan Scheme (AILs); machinery & improving farm buildings.
Loans €25k - €5m. Term 24 – 120 months. Enterprises in Financial Difficulty not eligible.
SBCI Agri Cashflow Support Loan; low-cost loan scheme to support farmers experiencing short-term
financial pressures due to farm prices & income volatility. Fund working capital, refinance of merchant credit or
replenish working capital used to finance capex.
Term < 6yrs. Unsecured. Fixed rate 2.95%.
SBCI Brexit Loan Scheme 2018; low-cost loan scheme to support SME’s impacted by Brexit to fund
Working Capital and/or innovation to adapt/mitigate Brexit challenge.
Term of 3 years, minimum of 1 year. Fixed rate 4%.
* Restricted to SB&A borrowers only.
Government Initiatives
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12
2. Credit Review Office
• The Credit Review Office was set up to ensure credit is not refused to viable businesses with valid propositions
• Customers must fully exhaust the Bank’s internal appeals process prior to invoking the CRO
• Customers, who have had their application for credit (or restructure of facilities) declined, reduced or are not happy with the terms of sanction, have a right to appeal the decision to the CRO
• The CRO will undertake an independent and impartial re-evaluation of the Bank’s decision
• Since October 2013 a maximum loan size of €3m threshold for SMEs applying for a review by the CRO
• The CRO review process will provide an independent opinion on the lending decision with either an endorsement of the original outcome or a recommendation to overturn it and provide the funds
• More information is available at www.cro.ie
Government Initiatives
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Government Initiatives
3. Credit Guarantee Scheme
The purpose of the scheme is to encourage additional lending to SMEs. Refinancing of other bank debt (non BOI) can be covered under the scheme. 80% guarantee to Bank.
Eligibility criteria: Viable SMEs that can demonstrate repayment capacity, but which do not fully meet the Bank’s credit policy and have been declined due to either:
Insufficient security for the new/increased lending, or
Aspects of the SME sector, target market or business model which are deemed to be high risk under the Bank’s lending criteria
An annual 1% premium is paid to the Government by the borrower for availing of the scheme
4. Microfinance Ireland (MFI)
MFI has been funded by the Government to provide loans to newly established and growing microenterprises across all industry sectors that do not meet the conventional risk criteria applied by banks. For a business to be eligible, they must:
Have a turnover of less than €2million
Employ less than 10 staff members
Be seeking funding for less than €25K (funding is provided on a term basis)
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Classification: Green
WHAT IS THINKBUSINESS? ThinkBusiness.ie is Ireland’s number one online resource for
SMEs a reference site to learn how businesses deal with
opportunities and challenges.
THINK BIG – THINKBUSINESS
• Starting – how to start a business
• Running – how to keep a business going in the right
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• Business Planning – how to plan for success and the
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the rest in the digital age
• HR – building the best team
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Classification: Green
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Bank of Ireland and Your Business
The Next Steps:
Talk to us – arrange a meeting one to one
We want to develop a long term banking relationship with you
We have a full range of business support services available to your business and will
ensure that all of your needs are met
We want to provide all viable businesses with suitable credit facilities – adequate
funding is available to support all viable and sustainable businesses
We are committed to supporting customers in or facing financial difficulty
We are here to support your business and build
relationships now and for the future
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Disclaimer
This document has been prepared by Bank of Ireland Business Banking for informational purposes only. Not to be reproduced without prior permission. Any information contained herein is believed by the Bank to be accurate and true but the Bank expresses no representation or warranty of such accuracy and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained in this document. Unless specifically stated otherwise, no prices or rates mentioned are bids or offers by the Bank to purchase or sell any currencies, securities or financial instruments. Except as otherwise may be specifically agreed, the Bank has not acted nor will act as a fiduciary or financial or investment adviser with respect to any derivative transaction that it has or will execute. Any investment, trading and hedging decision of a party will be based on its own judgement and not upon any view expressed by the Bank and shall be based on an arms length negotiation with the Bank. You should obtain independent legal advice before making any investment decision.
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Thank You!