Looking beyond banks for business credit

BELFAST BRIEFING:BUSINESSES IN the North are still having problems getting money out of their banks, according to a new survey. It comes as no surprise, given the current Nama-fuelled climate in Northern Ireland where banks are somewhat reluctant to lend even small sums to reliable clients, writes FRANCESS McDONNELL

There is a cloud of uncertainty hanging over many businesses in the North, even for those who managed to stay well afloat during the recession. The fact that First Trust, one of the biggest high street retail banks, has recently been put up for sale by its parent, AIB, is likely to slow the flow of corporate cash further.

Joanne Stuart, chairwoman of the Institute of Directors, says feedback from businesses about bank lending in the North is not encouraging. “Our most recent survey confirms a continuing issue with bank credit, with 43 per cent saying conditions had worsened in the past six months,” Stuart said.

According to the IOD, banks say they are continuing to lend to viable businesses but it is hard to pin down exactly which banks are lending, or to whom.

The results of a cross-Border survey by accountants Grant Thornton last month suggest businesses in the North are not optimistic that the credit scene will improve this year. Partner Colin Feely believes increasing access to credit should be a high priority for the Assembly.

“This survey is showing that they may need to be looking at factors in the South as well as the UK,” Feely has warned.

In the meantime, the IOD believes businesses in the North, particularly those who are small or in start-up mode, should start looking at less traditional options for new or additional sources of cash. Recent research carried out by the IOD suggests 90 per cent of businesses in the North have never considered venture capital or investment by a business angel.

So why are companies not looking towards alternative sources other than the banks? It is certainly not because it is unavailable in the North. There are some pots of money in Northern Ireland but you just have to know which rainbows to look under.

One of the most obvious places to start is the Northern Ireland Science Park (NISP) which is fast becoming a byword for successful start-ups. The park has proved to be a major driver in encouraging entrepreneurs and helping them find the finance to realise their ambitions.

Last month the US economic envoy Declan Kelly launched a $1 million US support package for NI Science Park Connect. The American Ireland Fund hopes to raise $1 million over the next three years for a new endowment to support the NISP Connect entrepreneurial programme and a new employee exchange programme. NISP also wants to raise £4 million for the endowment fund over the next three years.

It is a major boost for the Science Park and will help underpin its existing entrepreneurial support programmes, such as the £25K awards. This is an annual talent contest which aims to find the next big thing in Northern Ireland and give them a financial helping hand to succeed with cash prizes.

Science Park tenant Halo, the Northern Ireland Business Angel network, also recently announced the launch of its first Business Angel EIS Fund worth £250,000. The fund, managed by London-based fund manager Javelin Ventures, intends to offer capital to local entrepreneurs.

Halo is funded by Invest Northern Ireland and InterTradeIreland. Alan Watts, its director, says the organisation plays an important role in helping to channel funds into the high risk area of start-up companies.

Later this week NISP will host a workshop on how to raise capital in the current environment. Peter Stafford, a Belfast-based partner at AL Goodbody, will lead the workshop which aims to show entrepreneurs and start-ups that you can still raise money if “you focus on the right priorities and avoid common deal-killers”.

Among the panellists will be Hal Wilson, from the Belfast-based venture capital fund manager Crescent Capital, which has said that it is actively seeking new investments in the North.

Aside from these there is the £10 million Viridian Growth Fund in the North and the £3 million Nitech Growth Fund, which is a venture capital fund established by Invest NI to bring new technology to market up for grabs.

Between them, the Viridian Growth Fund, which is managed by Belfast-based venture capital fund manager Clarendon Fund Managers, and Nitech each have up to £250,000 to invest in one business.

What these and similar groups are offering is a way forward for businesses and entrepreneurs which, in the current climate, should not be sniffed at.