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How to Choose a Small Business Loan in Ireland

GRID Finance

Every business needs a finance provider they can trust. GRID Finance can be that partner for you. That’s why we’ve put together a helpful guide for SMEs that are unsure about which loan or financing option is right for their business.  

WHAT TO CONSIDER BEFORE APPLYING FOR A LOAN OR FINANCING

When considering applying for a finance, it’s crucial to weigh several important factors to ensure you make the right financial decision for your business. Here are nine key considerations to take into account before moving forward with an application: 

1) UNDERSTANDING THE TYPES OF LOANS AVAILABLE 

There are plenty of loans available to SMEs in Ireland. They can come from the banks, credit unions, or other financial institutions.  

However, it’s important to note that each will offer different interest rates and repayment plans. So take the time to consider which is the right one for your specific needs.   

2) WHAT’S YOUR BUSINESS PLAN? 

Having a good business plan is essential. You might be absolutely certain about where you want to take your business, but without a detailed plan, your finance provider won’t be as sure.

3) ASSESS YOUR BUSINESSES FINANCIAL POSITION 

Is your business able to repay? It’s something to seriously consider before you make contact with a finance provider. GRID Finance are experts in providing Funding suitable for your business with standard information you should have to hand. 

4) WHICH FINANCE PROVIDER IS BEST FOR MY BUSINESS? 

The first thing to consider when choosing the right finance provider is what kind of business funding you need. With as many options to access funding out there as there are finance providers, finding the right match is key.  

Banks and credit unions are the more traditional options, but alternative finance providers such as merchant cash advance companies, and P2P (peer-to-peer) finance providers, are seeing more engagement because of the level of flexibility and speed in response they offer via alternative financing options.. a quick ‘yes’ or ‘no’ is vital to business owners.  

5) WHAT ARE THE BASIC FUNDING REQUIREMENTS? 

Even with the most popular funding offers, you might find that your business does not qualify. That’s why it’s a good idea to read the requirements carefully before you even approach the funding partner.

6) HOW MUCH DO YOU NEED AND WHY? 

What will the capital help your business achieve? It’s an important question to ask yourself when deciding on how much funding you need. Take into account the business’ movements over the next few months to be sure that all excess outgoings are taken into account. By doing this you’ll get a clearer picture of how much you need for it to be beneficial to your business.

7) HOW MUCH CAN YOU COMFORTABLY REPAY PER MONTH? 

This is the most important question you must ask yourself, as the repercussions of not meeting repayments can be serious. Traditional finance providers, such as banks, set repayments to a fixed monthly amount that has to be paid on a specified date.  

If you’re unsure that your business will have excess funds on those days, it’ is best to find an alternative funding option more suitable to your business.  

For example, a flexible funding advance for B2C  from GRID Finance allows flexible daily repayments based on the business’s daily sales. 

8) HOW FAST DO YOU NEED THE CAPITAL? 

Knowing exactly how and when you plan to use the capital is key to ensuring that you use the funding properly. If you need the facility quickly, you should prioritise one that is easy to gain within your timeframe.  

Traditional loans can take time, so an alternative finance provider like P2P providers – where private investors provide funding to a business – or merchant cash advance would be quicker. 

9) WHO ARE THE TOP IRISH SME LENDERS? 

You should do careful research on the SME loans and funding options available in Ireland, many can be too good to be true. With a reputable finance partner such as GRID Finance, you can be confident that the agreement you entered into will be honoured.

TYPES OF BUSINESS LOAN LENDERS 

There are a large number of lenders in Ireland, all of which offer different types of short terms business loans. It’s best to research them all to find out which one suits your business loan needs. Below, we outline the main types. 

1) TRADITIONAL BANK LENDERS 

If you look to a traditional Irish bank, your business can apply for a loan which will allow you to take out a set amount of money for a set period of time.  

If a business has a long history with one bank, and has maintained good credit, it may be easy to get the loan but harder to meet repayment terms.  

Traditional Banks tend to require significant documentation and supporting information to process an application which can become time consuming.

2) MERCHANT CASH ADVANCES 

GRID Finance offers the best merchant cash advance option in Ireland. Unlike a loan, It allows flexible repayment terms and rolling facilities that allow for real-time consideration of sales, with repayments tied to a % of the amount of earnings the business takes in a day or a month.  

This means if you are quiet for a month or two your repayments slow down with your trade and spare you cashflow for other costs.  Key to this option is taking payments from your customers by card or through any ecommerce/food ordering platforms, It’s a great option for growing or expanding businesses.  

Plus, once an amount is mostly repaid it can be accessed again. 

3)  FLEXIBLE FUNDING FACILITY

A Flex Funding Facility from GRID Finance provides businesses with financing options that offer adaptable repayment terms. This type of finance is designed to align with the cash flow cycles of a business, allowing for varying repayment amounts based on the financial performance and revenue of the business.  

Essentially, the repayments adjust in proportion to how well the business is doing financially, which can provide significant cash flow relief during slower periods or when unexpected expenses arise. 

4)  MICROLOANS 

Your local credit union is a good place to start if you’re looking for a microloan. Small in nature, with known repayment terms, however it would need to be seen to somehow benefit the local community.  

A bicycle rental business, for instance, may get microloans from the community group for improving local amenities that also benefit the business.  

Microloans are great for small upgrades which add to the usability of the business by the local community.

COMPARE RATES, FEES, AND OTHER DETAILS 

It is worthwhile to review common rates, fees, and basic details when choosing a business loan or funding facility. Below you’ll find a rough guide to give you an idea of what you can expect when researching the different options available.  

These are approximates and do not represent any particular finance providers. Some customers can avail of preferential rates due to having other products through the lender, such as life insurance or other insurance policies.  

Different types of finance providers have differing terms, which can also differ between their own competitors.  

TERM LOAN DETAILS 

  • Average loan amounts: between €5,000 to €1m+ 
  • Interest rates: ECB linked to 4 – 4.5% 
  • Funding timeframe: 3 months from applying to gaining release of funds. 
  • To qualify: A typical minimum credit score showing good credit, being in business over 2 years, average monthly revenue above €8,000. 
  • Good credit required to gain an unsecured loan; security in form of collateral or third-party co-signer may be required. 
  • Payments are pre-calculated and are expected to be paid on a specific, set date. There would be late fees for any late payments

MERCHANT CASH ADVANCE (MCA) TERMS 

For MCA, the best terms available for SMEs in Ireland can be found at GRID Finance. In general, a merchant cash advance will offer:  

  • Flexible repayment terms. Your sales receipts will repay your facility by a % and repayments flex alongside your busy and quiet periods. 
  • Daily interest rates calculated against a typical cost of capital rate for 12% and 14% for a 12 month facility  
  • Funding timeframe: As low as 24 hours to get approval and speedy delivery of funds  
  • To qualify: businesses must take card payments or have sales through ecommerce / food ordering platforms and be willing to share a read-only copy of their bank statement in order to determine the daily repayment rate.  
  • Average amounts: between €10,000 to €250,000 

GRID Finance flexible facilities now work for B2B businesses that receive regular payments from their customers through bank transfers. A small daily repayment that changes with your level of trading income. 

This means you are repaying smaller amounts in your quieter periods. 

MICROLOANS TERMS

  • Can take up to 3 months to gain approval. 
  • Loan amounts up to €50,000 on average. 
  • Good credit needed. 
  • Interest rates are typically set at 2-3% above the European Central Bank Rate. 
  • Specific repayment amounts and dates with late payment fees if a payment is late. 

STEPS TO TAKE WHEN CONSIDERING SME LOAN AND BUSINESS FINANCE OPTIONS  

Ask yourself, how capable is the business of making the repayment, will the funding support or strain your business overall? Are you accessing enough – or do you need more to reach your goals?

If your business has operated so far without a business plan, it’s time to make one, even if you have to subcontract that out. It’s also worthwhile to have a full picture of the business landscape at the time of applying. Here are a few other factors to consider. 

1) ASSESS YOUR CASH FLOW AND EXPENSES

Make sure you know how much your business brings in each week and how much it pays out. A full list of expenses will be a requirement for fiancnde providers and it can also help you see where your business can cut back. Cash flow should be looked at as well, in terms of short, medium, and long term, whether it is payments coming in or payments going out. 

2) RESEARCH FINANCE PROVIDERS AND GET QUOTES

Make a list of finance providers that you think will be able to offer you your desired amount. Contact each of them for a quote and then compare the different terms on offer to you. Don’t forget to get quotes for all extra fees that apply to the facility over its lifetime, these can be significant with some finance providers.

3) REDUCE RISKS 

Always consider the risks involved in taking out a business loan or funding advance. Secured loans require leveraging further assets or attaining people. Traditional loans and microloans, P2P lending and many online loans require a set payment date and amount. To reduce risk, look for a facility that does not require security. 

GRID FINANCE IS HERE TO SUPPORT YOUR BUSINESS ON ITS FUNDING JOURNEY 

If you’re an Irish SME looking to access funding, consider traditional lending options first. However, regardless of your credit situation or your thoughts on using collateral, there are alternative options available.  

Consider a merchant cash advance or flexible funding facility from GRID Finance for flexible terms tailored to your business needs. Applying is straightforward, why not contact us today to get started?