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

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

2 TARGET RETURNS Funding Provider Returns VS. Risk Private Equity c.25% Venture Capital c.25% Property c.10% - 12% Dev. Cap. & Mezzanine c.12%+ Venture Debt c.20% Infrastructure c.8% - 10% Senior Debt c.5% RISK

3 How Banks consider a Credit Application from an SME The bank needs assurance that the business has the ability to repay the facility over its life, from the cash generated by the business Based on the financial information provided by the business consisting of historical financial information and future expected sustainable cash flows A key focus for banks is the Debt Service Coverage Ratio of the borrower Good credit decisions have to be informed by information on the current and future status of the business Free Cash Flow divided by debt servicing costs Free Cash Flow relates to EBIDTA less Capital Expenditure Working Capital Tax obligations Dividend obligations Other

4 How Banks consider a Credit Application from an SME Other Considerations o Business owner sector experience o Management background o Timeliness/Reliability of information o Financial track record (business and owner) o Competitive position in the market o Concentration risk o Control over all aspects of the business (e.g. raw materials) Most banks will stress the application and scenarios to allow for unknown events (market and internal)

5 Applying for credit Step 1 Come and talk to us regularly about your business Step 2 Provide a comprehensive information pack relative to your credit requirement Step 3 Be realistic, demonstrate your need, repayment capacity and ways to mitigate risk Step 4 Your Relationship Manager is your Advocate

6 SMEs are Integral to AIB s Business AIB Group have remained profitable in Q1 and continue to deliver on strategic objectives We approved 6.4bn in SME credit in bn Our new money approvals are up 22% 22% Reduction 600 In 2014 we sanctioned an average of 600 facilities per week to SMEs We approved 93% of formal SME 93% credit applications this year of 1.7bn since the end of 2014 in impaired loan volumes to 20.5bn

7 Types of Credit Available Working Capital Invoice Finance asset based debtor finance product, that provides an upfront release of cash tied in trade debts Credit Line flexible and competitive working capital offer for SMEs and Farmers Business Overdraft allows your current account to go into an overdrawn position, up to a pre-agreed limit. There is no fixed repayment period but an overdraft is repayable on demand and is subject to annual review and it may/may not be renewed. Investment & Lending Loans (Business Loan, Start Up Loan) - funding provided by the bank to be repaid by a certain date with a specified interest rate Asset Finance finance to purchase new assets through leasing or hire purchase. Finance is available over a 2 5 year period. Longer terms can be arranged where appropriate. Prompt Pay Short term finance for business which helps to spread the cost of once-off payments/insurance payments for up to a period of 11 months to improve business cash-flow. Sector Funds & Equity Finance Sector Funds range of dedicated funds to support investment and growth in key sectors Agri 500m, Exports 200m, Energy Efficiency 100m, Renewable Energy 200m, Residential Property 350m, Healthcare 300m, Community Building/Social Housing 150m Seed Capital AIB commitment of 90m

8 Strategic Banking Corporation of Ireland AIB launched a 200m SBCI Loan Fund* for SMEs on 9 th March 2015, the main features are: 4.5% Per Annum Variable Rate A very competitive interest rate which is 2% below the Standard Variable Business Loan rate Up to 5m over 10 years Loan amounts of up to 5m are available over terms from 2 years up to a maximum of 10 years *Available to most SMEs and Farmers subject to certain exclusions. Go to for the full list of exclusions. The support of the Governments SBCI Fund has state aid implications Multi Purpose Loans Available* Working capital and investments Refinance of loans held with certain banks exiting the Irish market Agricultural investment loans 30k in 48 Hours As part of AIB s Backing Brave programme Quick and responsive credit decisions for AIB Customers on new Business Loans & Overdrafts up to 30,000*are available within 48 hours *We aim to provide a decision within 48 hours upon receipt of all required information. 48 hours excludes Sat., Sun. & Bank Holidays. Customers experiencing financial difficulties may require additional time 8

9 Thank You John Irwin Tel: Important Regulatory Information Lending criteria, terms and conditions apply. Credit facilities are subject to repayment capacity and financial status and are not available to persons under 18 years of age. Security may be required. Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland.