Non-Bank Debt Finance providers operating in Ireland

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Roderick Johns
10 years ago
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1 Non-Bank Debt Finance providers operating in Ireland Presented by: Tom Early Enterprise Ireland Date: Tuesday 10 th February 2015

2 Understand the Banks Perspective

3 Banks are concerned with REPAYMENT CAPACITY De-risking the proposition i.e. collateral / risk identification and mitigation Validation of information The entire relationship, including personal connections Return and theirs is limited Understanding the need financial information is NB but so is the story

4 Funding Landscape and Gap

5 SME Risk Funding Landscape Micro (171,000 / 91%) & Small (14,500 / 7.5%) Medium (2,457 / 1.3%) Start-ups Seed Funds 20m EI / LEO s EIIS Angels FFF Programme 3 (525m) & 4 VC funds MFI < 25k ( 90m) EI / LEO s EIIS Angels FFF Dev Cap ( 441m) NPRF SME ( 800m) Innovation Fund ( 250m) Programme 3 & 4 VC funds EI EIIS Limited risk funding available for established SME s thus over-reliance on Banks

( 90m) EI / LEO s EIIS Angels FFF Dev Cap ( 441m) NPRF SME ( 800m) Innovation Fund ( 250m)

6 Over reliance implications Banks want low risk - less likely to support growth finance (RedC) Lack of information mean a proposal is high risk For smaller customers banks adopt a light touch high volume approach Less players remainder are refinancing those exiting Availability of funds is not an issue their perceived risk is Thus Lack of sector knowledge, access to easily verifiable comprehensive information and a light touch approach can result in viable propositions being rejected and no need for the banks to be innovative

Availability of funds is not an issue their perceived risk is Thus Lack of sector knowledge, access to easily verifiable

7 Working Capital Funding issues

8 Funding WC Then OverDraft Value Creation A/c Payable (Trade Creditors) Raw Materials WIP Cash THE WORKING CAPITAL CYCLE (OPERATING CYCLE) Finished Goods / Stock A/c Receivable Trade Debtors Sales

9 Funding WC Now OverDraft Value Creation A/c Payable (Trade Creditors) Raw Materials WIP Cash THE WORKING CAPITAL CYCLE (OPERATING CYCLE) Finished Goods / Stock A/c Receivable Trade Debtors Sales

10 So what does this mean for WC Production period Debtor period Stock Sale Made / PO raised Banks For Domestic Sales Raw Materials Purchased Non Banks Debt Finance Tower Trade Raw Materials Delivered Banks view as high risk security required For Export Sales Goods Finished Goods delivered & Invoice raised Banks view as high risk security required / onerous terms Convertibill Bibby Trade Team Global Celtic Aztec Banks view as low risk Aztec Catalyst Close Bibby Celtic Convertibill Interface Customer Pays

Export Sales Goods Finished Goods delivered & Invoice raised Banks view as high risk security required / onerous terms

11 Overview of Providers Products

12 Products that Support Working Capital Pre-Shipping Stocking facilitates the purchase of stock for planned sales Supplier finance facilitates the early payment of creditors or can be used to extend credit terms PO finance facilitates the purchase of stock only with a purchase order Post Shipping Invoice Discounting / Finance sell the Debtor book Single Debtor Sell an individual debtor on an ongoing basis Single Invoice Once off sale of an invoice Reverse ID Customer arranges discounting of invoices for its supplier

only with a purchase order Post Shipping Invoice Discounting / Finance sell the Debtor book Single Debtor Sell an individual

13 Other Finance Products These include Bonds both surety and on-demand Lease finance finance specific to the purchase of an asset Term Loans loan with a specific repayment schedule

14 Overview of Providers Working Capital Asset Pre- Shipping Post Shipping Single Provider Term Asset backed Lease Stocking Supplier Finance PO ID Debtor ID Single Invoice Bonds Co Type Amounts considered Bibby Financial services M/S/Me > 50k Close Brothers S/Me/L >100k Convertibill M/S/Me > 10k Aztec Finance M/S/Me > 30k InvoiceFair M/S/Me > 50k Celtic M/S 200 to 200k Interface finance M/S 5k upwards Catalyst finance S > 10k Grid Finance M/S <75k Linked Finance M/S <50k GRENKE M/S 1k to 500k Fexco M/S/Me > 5k to 1m SME Finance & Leasing Solutions Limited M/S 1k to 10k Leasing Company of Ireland M/S/Me > 5k Lighthouse M/S/Me Varies Finance One S/Me Surety bonds S/Me NA Microfinance M/S <25k Trade Team Global S/Me > 50k Tower Trade Finance Ireland M/S/M > 10k

finance M/S 5k upwards Catalyst finance S > 10k Grid Finance M/S <75k Linked Finance M/S <50k GRENKE M/S 1k to 500k Fexco M/S/Me > 5k to 1m SME Finance & Leasing Solutions Limited M/S 1k to

15 In terms of the SBCI Risk is still borne by the Finance provider Need to address the perceived risk

16 Thanks

Financing Your Business. 27 th May 2015 John Irwin Head of AIB SME Strategy & Enablement

Financing Your Business. 27 th May 2015 John Irwin Head of AIB SME Strategy & Enablement Financing Your Business 27 th May 2015 John Irwin Head of AIB SME Strategy & Enablement TARGET RETURNS Funding Provider Returns VS. Risk Private Equity c.25% Venture Capital c.25% Property c.10% - 12%