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Dublin: 12 °C Wednesday 16 October, 2019
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How to: Get blood from a stone... or at least a loan from a bank

Sure it can be hard, but here are a few things that could help.

STARTUPS AND SMALL businesses need to improve their game if they want to maximise their chance of getting a bank loan or a cash injection from angel investors.

But Lar Burke, from CompanyMoney, said with a clear understanding of what different backers were looking for and a slick pitch, small-and-medium enterprises (SMEs) could at least increase the likelihood they would get the money they wanted.

“I think a lot of small businesses are struggling because the quality of their presentation and the quality of their proposal to banks isn’t as good as it could be,” he told TheJournal.ie.

One of the keys to putting together a good pitch for a bank or investor was to be able to get across a clear message about what the business did and how it would appeal to customers, he said.

I have sat through 15 or 20 minute meetings and you still don’t know what the product is.”

Burke, an experienced advisor on SME finance, has sat on both sides of the business fence – as a tipster for entrepreneurs trying to fund their operations and as a trainer for banks and state development agencies like Enterprise Ireland.

Burke Lar Burke

He said startups and small businesses should look at things from the point of view of the financier so they could tailor their approach accordingly.

“If you can convince any bank lender that they will get paid back then they will lend you money - it’s that straightforward,” he said.

“If you tell them how much money you are going to make down the track they are not going to be interested – that is the part that is going to be of interest to investors.

They are the ones that what to know they are going to get 4 times the return in 4 years. That’s also true of enterprise organisations, but they also want to know about the number of jobs you’re going to create. But if people don’t do their homework they think they’re all the same.”

In defence of banks

While Ireland’s big banks have repeatedly taken a kicking from the small-business lobby for being too tight with their lending since the recession, Burke said giving out money to riskier, early-stage operations was simply not part of their business model.

“I think they are far more rigorous in their lending now and I think a lot of small businesses are struggling because of the quality of their presentation and the quality of their proposal to banks isn’t as good as it could be,” he said.

Despite the different criteria lenders and investors apply to proposals, Burke said there were four key things any financier wanted to know about a business and these were the points an SME or startup owners should focus on:

  • Who are the people? This is all about being able to demonstrate your track record and capabilities.
  • What is the business case? How good are the ideas behind the operation and do they fit in with the backers’ criteria?
  • How is the operation already funded? Very few financiers will want to hand over 100% of the money a business needs in one hit.
  • What is the return? For investors this will be all about multipliers – 4 or 5 times their money within a set number of years, while for lenders we’re talking interest rates, terms and the risk they won’t get paid back.

All this month as part of TheJournal.ie’s ongoing focus on the SME sector, we have been looking at some of the main financial and budgetary matters that relate to these key businesses.

READ: Why switching their homepage is the first thing all owner-operators should do >

READ: Is Ireland really ‘the best small country in the world to do business in?’ >

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About the author:

Peter Bodkin  / Editor, Fora

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