With so much changing in the landscape, here’s a snapshot of the Northern Ireland funding landscape for entrepreneurs.
Bank loans
The four local banks (Bank of Ireland, Ulster Bank, Allied Irish Bank and Danske Bank) each provide small business loans, which is normally the first port of call for small businesses.
Asset Based Finance
Asset-based finance allows businesses to raise finances against the value of their assets. This form of funding involves lending money to a business against their property, plant, machinery, stock, or sometimes even their brand name.
ABF specialists operating in Northern Ireland include Simply Asset Finance, Keys Commercial Finance and Close Asset Finance.
Invest NI
Nearly all SME funding in Northern Ireland operates under the aegis of Invest NI, Northern Ireland’s inward investment agency, which aims to be a one-stop-shop for businesses in Northern Ireland.
Invest NI oversees debt and equity funding split between debt and equity funds, beginning with seed stage through to Series A and, ultimately, equity funding.
Mezzanine funding
This method of finance is also debt-based but can in some cases be converted into an equity stake if a business is performing poorly. Mezzanine finance sits behind bank debt but ahead of trade equity. It generally carries a higher rate of interest.
Administered by Invest NI (see above), the SBLF is an £8 million loan fund for NI-based individuals, private companies and social enterprises in the SME and micro enterprise size range and in the start-up or growth phases of development.
Loans are typically unsecured and range between £10,000 and £125,000 (maximum £15,000 for start-up business). Interest rates range from 6-10%.
Equity funding
Techstart NI is a first cheque VC that doesn’t require PMF or revenue to make an investment. First cheques are typically up to £750,000, with opportunity for follow-on funding.
The Co-Fund NI is a £47.3 million equity fund for early-stage start-ups that will co-invest alongside business angels or private investors. Investments are between £150,000 and £1 million at a ratio of of up to 50:50, though typically 35%.
Clarendon Fund Managers (CFM) manages the Co-Fund on behalf of Invest NI.
Investment Fund for Northern Ireland
The Investment Fund for Northern Ireland is particularly keen on supporting equity investments – up to £5 million (€5.8 million) in this case. Just make an enquiry through this link.
Debt finance
The Debt Finance offering is a better option for small businesses. It can support a number of operations, including:
Leasing new commercial premises
Hiring a new team
Funding marketing costs
Purchasing new machinery or equipment
Launching a new product or service
Private equity
Unlike debt, private equity is invested in shares in the business. Debt demands a fixed repayment, whereas PE is dependent on the growth and profitability of the business.
Private equity funds that have a record of investing in Northern Irish SMEs include MML Growth Capital Partners Ireland and Broadlake Capital.
MML invests anything between €2-€30 million in each business, while Dublin-based Broadlake invests between €2-10m in established companies.
This article was first published on Growthbusiness.co.uk by Tim Adler.
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