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Bad Investment Makes no Cents.

We have spoken at length in the past about various forms of funding and investment in business and the importance of the availability of funding for all businesses in particular small and medium enterprises who may rely on outside funding. Something which is rarely touched upon is the importance of choosing the right investor for your business, and one which can go the distance alongside your company. Failure to choose a sustainable investor can cause serious problems for both your business and the investor.

This issue is especially important this week as it was revealed that many Irish investment firms have been found to have failed to meet the required standard of investors by the Central Bank of Ireland. The bank recently conducted a review of suitability requirements for investment firms and found many companies to be sorely lacking, which is not encouraging news for business owners wishing to secure funding. Michael Hodson, Director of Asset Management has been quoted as saying of the findings:

“The review highlighted that firms need to improve the quality of information collected and how this information is utilised in the suitability process. With the introduction of higher suitability standards, the quality of the information collected is all the more significant.  Boards are reminded that they are responsible for implementing an appropriate governance framework that meets the suitability regulatory requirements and embeds a client-centric culture across the firm.  Investor protection is at the core of the Central Bank’s mandate.” 

The review found that many firms were unable to demonstrate that the required suitability policies and procedures were implicated whilst also pointing out that many application forms were incomplete. Some firms were also found to be reliant on self-assessment alone and had little to no tools in place for assessing suitability for investment, relying heavily on technology. In perhaps the most worrying finding, many companies were found to have nothing in place for dealing with potentially vulnerable clients and companies.

Thankfully, the Central Bank assure companies that in any areas that the findings may be damaging to consumers formal supervisory requirements have been implemented which should reduce risk greatly for prospective clients.

As always we are available for any advice or guidance you may require on business or finance matters.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Are you Talkin’ to SME?

We have spoken in the past about the dearth of financing options for Small and Medium Enterprises in Ireland following the recession. Recently, there seems to be a push towards recognising the importance of SMEs as the backbone of our economy and as such, the need for available funding to ensure their continued success.

One such form of funding of which Ireland has seen very little in recent years is ‘Peer to Peer’ (P2P) lending. The term might bring flashbacks of desperately attempting to download your favourite songs on a dial-up connection but rest assured this is a far more functional process. Peer to Peer lending is now one of the most popular methods of funding a business or idea (think Kickstarter, IndieGoGo etc. these options are also known as ‘crowdfunding’). The process allows ordinary individuals with cash to invest be ‘matched’ with a business seeking finance. The entire process is done online which reduces overhead costs and generally makes for a smoother and cheaper lending process for both parties.

One such Irish Peer-to-Peer lender, Linked Finance has recently received full authorisation by the UK’s Financial Conduct Authority (FCA) to allow the company to enter into the UK Market. Linked Finance’s CEO Niall Dorrian was quoted as saying the following about the authorisation:

“I am very pleased that we have secured full FCA approval. It puts us ahead of the curve in terms of preparing for any regulation of the sector in Ireland. It also demonstrates to lenders and borrowers here at home that Linked Finance operates to the highest standards.”

The authorisation is well timed for Linked Finance as our own Department of Finance has initiated a public consultation process with the view of imposing some regulations on Peer-to-Peer lending in Ireland, aiming to make this a safer process for all parties. The UK already has a comprehensive regulatory procedure with regard to P2P lending, and it is thought that Irish practises will begin to follow suit as P2P lending grows in popularity here. The UK also already has many options in place for funding SMEs which Ireland may eventually follow suit on given that these enterprises make up such a large chunk of our business.

Linked Finance have already facilitated more than €25m in loans to Irish SMEs and it is hoped that in the future there will be a marked increase in lending options for SMEs as they continue to be the backbone of our economy. Linked Finance in particular hope that any kind of regulation will be a help to the sector rather than a hindrance as CEO Dorrian has said:

“Any regulation of the sector in Ireland should seek to encourage, rather than inhibit, further diversification within the financial landscape.”

For now, at least, times seem to be changing positively for Irish SMEs and long may this last.

Should you have any queries or require further information on this or any other business or financial matter please don’t hesitate to contact us here at EcovisDCA’s new head office, where as always we will be delighted to help.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

Neither a borrower nor a lender be

January is often a time of financial uncertainty for many people as the spending sprees of December leave somewhat of a hole in the pockets and we begin to add to our savings once more. The January sales offers a slight boost to the retail sector during this slump, while for the rest of us they tend to have the opposite pocket-emptying effect. Business lending, however seems to be in full swing in 2017 already. As we discussed towards the end of last year, there was to be somewhat of a new focus on lending in the SME (Small and Medium Enterprise) sector, a sector that found itself sorely left behind and without many financing options available to them whether starting up their business or expanding into bigger and better things.

As predicted, lending to the SME sector has been steadily increasing in recent months, rising by over 5% when comparing the 2016 summer months to the same period in 2015. When comparing the summer months of 2015 with those of 2016, lending to SMEs in the manufacturing sector had increased by approx. 37% and the hotel and restaurant sector by approx. 25%. It has also been found that the rate of loan defaults in particular in the SME sector has dropped from 41% in 2013 to 24% in 2016.

As always it is wise to take these positive findings with a pinch of salt for anyone in the SME sector as there currently tends to always be a down side. In the case of the new availability of lending and the increase in same within the SME sector, the double edged sword of lending has also come with a higher cost of credit than most European countries, possibly due in part to the previous lack of availability. Similarly, with the new availability of lending options, rejection rates are also on the increase with the latest Central Bank loan data showing an increase in the rejection rate from 11% to 16%. Interest rates are also showing to be higher on smaller loans so it is advisable to take into account all of your available financing options before making a commitment to one to ensure that you are getting the best deal for your business and also signing up for a financing option which is sustainable for you.

Rachel McGovern of PIBA financial brokers has been quoted as stating that these findings point to an existing lack of competition in Ireland stating that

“More needs to be done to support Irish SME growth, and the state needs an urgent analysis of what is keeping competitive forces out of the Irish lending market.”

As always, we are big supporters of the SME sector and welcome any changes which will assist this sector to grow and flourish. Should you require any help, guidance or advice for your own newfound or burgeoning SME, please don’t hesitate to contact us and we will be delighted to be of assistance.

 

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

ICS YOU CAN

Something which we consistently come back to as a topic of interest for our customers are mortgage lending rules and the tiresome process of trying to get a foothold on the property ladder, which let’s face it, these days can often feel like playing a very difficult video game. You’re pressing all the right buttons, but somehow still find yourself placed back at the previous checkpoint. Recently, with minor changes made to the rules for first time buyers it seems that the clouds are clearing somewhat to allow an easier path to your first home. Further good news continues to come in for prospective new home owners in the form of the return of schemes and products which assist in the purchasing process and provide buyers with more options than were previously available. Following on from the economic downturn, all available products and schemes aimed towards making it easier to begin the climb up the property ladder seemed to effectively disappear overnight. Recently we have seen a slow resurgence in these schemes and products which is welcome news. Today we will be discussing the new buy-to-let product from Dilosk and ICS mortgages which is aimed towards both individuals and companies.

 

The idea of buy-to-let is to turn a property purchase into an investment in order to utilise it as a cash flow solution. Upon purchasing the property, it is then placed for rent in the hopes of covering mortgage costs as well as any outgoings and perhaps generating some amount of income for the landlord. Buy to let involves dealing with the expectation of capital growth and thinking in the long-term which can be tricky as these matters are always in flux but it is ultimately a worthwhile endeavour which can generate cash flow which would not ordinarily exist which is never a negative thing these days.

 

ICS’s buy-to-let mortgage package is available to both individual and company investors. The loan structure for both options is fairly similar in that both offer a 10 year interest only option and a 20 year capital and repayment option as well as a minimum term of 5 years and a maximum of 20. The differences arise in relation to the borrowers themselves as there are additional criteria which applies to the individual and not the company investor.

 

The individual must be:

 

  • Min age at application: 21 Years.
  • Max age at maturity: 75 Years.
  • Minimum annual income: €40,000.
  • Max of four applicants.

 

 

The property must also be in the Republic of Ireland. Lending will be made available to those who meet these criteria, have a clean and who wish to buy in any major cities in the Republic of Ireland with more than 10,000 citizens. Further information can be found on their website or by contacting ICS directly. Finally we are seeing some positive movement in the mortgage market

 

Should you require any help, assistance or guidance on these or any other tax or business matters, please don’t hesitate to contact us.

 

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

SBCI LOANS

Strategic Banking Corporation of Ireland

In March of this year, a new low-cost loan fund was announced by the SBCI. This new fund could see SMEs and the farming sector have greater ease of access to much-needed funds through some of the country’s major banks. As of late March, its board of six directors has been confirmed, taking this from a pipe dream to a very real and tangible option for the growth of smaller Irish businesses.

This fund will offer long-term working capital through major lending institutions. Its purpose is to offer SMEs and the farming sector more flexible products than are currently available to them. They will offer low-cost funding to financial institutions. The idea being that these savings will then be passed on to SMEs. AIB and Bank of Ireland have already signed up as partners.

So what is the SBCI?

The SBCI is the Strategic Banking Corporation of Ireland is a new bank launched in the last quarter of 2014. It is hoped that it will become the primary source of funding for SMEs in coming years with the Government hoping that over €5billion will be made available to SMEs in the future.
The initial funders for this new banking venture are the Ireland Strategic Investment Fund (ISIF), the European Investment Bank (EIB) and the KfW German promotional bank.
The SBCI is a strategic SME funding company with the primary goal of creating access to flexible funding for Irish SMEs. The SBCI aims to:

  • Provide flexible products with flexible repayment options.
  • Provide lower cost funding to major lending institutions to be passed on to SME’s and the farming sector.
  • Create real market competition for new entrants to the SME lending market.

AIB are currently offering customers looking for a new business loan of up to €30,000, an answer within 48hours. They are also offering loans at a 2% discount from their Standard Business Loan Rate. Funding of up to €5m for the growth and expansion of your business will be made available. Their terms will be between 2 and 10 years.

Is a loan with SBCI the right choice for your business?

These loans are open to most SMEs. This form of funding is open to your business providing it meets the following criteria:

  • The company must have a turnover of €43m or less.
  • The company must not be part of a wider group of businesses.
  • The company must have less than 250 employees.
  • The company must have a significant presence in Ireland.
  • The company must have less than 25% of their capital held by public bodies.
  • It is important to bear in mind that your chosen lending body will need to share your information with the SBCI

We would advise consulting with your local participating lending body in order to ascertain your company’s eligibility for this scheme. If you have any queries at all about this fund and how it could benefit your business, please don’t hesitate to contact us at DCA Accountants.

ULSTER BANK LOAN REFINANCING

The final loan sale for the parent of Ulster Bank RBS (Royal Bank of Scotland) is due to be completed in September 2015. The final sale of the ‘Project Aran’ non-performing loan portfolio to Cerberus in December 2014 saw the disposal of the loan book relating to property borrowings. The focus has now shifted to the Small and Medium Enterprise (SME) lending book.

 

Following on from this, Ulster Bank have now agreed to allow borrowers apply to refinance existing debts through a third party bank. The hope is that all offers would be submitted by February 28th 2015 with full financing to be completed by March 31st 2015.

 

So what does this mean for you should you wish to pursue this option?

 

With such a tight timeline we would advise that all borrowers should be swift and thorough in compiling and submitting their documentation. Ensure ahead of time that all of your documentation is present and correct and that all points and requests are backed up with the valid paperwork. It might seem like an obvious request but even the smallest omission can cost you valuable time. With such a short period of submission, there is unlikely to be time allocated for re-submission.

 

Bank of Ireland are said to be gearing up to refinance a high volume of Small Business Loans from Ulster bank ahead of this portfolio sale, in a move similar to that which occurred with the Government Credit Guarantee scheme, which has been extended to cover business whose lenders are/were leaving the Irish Market. This scheme was originally only available to new loans but the decision was made to open it up for refinancing options with the move of Danske bank among others out of the country.

 

The issue for borrowers hoping to opt in to this refinancing offer of Ulster Banks is of course in the short timeframe allotted for submission so organisation is key and, as always DCA Accountants are here for you should you require assistance.

NEW MORTGAGE RULES

The Central Bank’s much debated and often bemoaned stricter mortgage rules were finally officially announced last month and officially put into place only last week.

 

Under these new tighter guidelines first time buyers appear to have business as usual as they can continue to apply for a 90% mortgage up to a limit of  €220,000. Anything above this limit will be subjected to the new 20% deposit requirement. Given that the average house price in Dublin is approximately €269,000 (according to latest published results from myhome.ie) it would seem unlikely that many buyers will escape the clutches of this requirement entirely.

Those looking to trade up on their existing homes will be entirely subjected to the 20% requirement for the entire sum of their loan which has caused concerns that many young couples and families may find themselves ‘locked out’ of the property market or, having already taken a step onto the first rung of the property ladder in easier financial climates, may find it impossible to take the next step, or fall off completely.

 

There will also now be a cap on the amount that can be loaned, something that banks and mortgage lenders previously had left to their own discretion. This sees lenders being restricted to only borrowing 3.5 times their income. Given that there is massive disparity between wage scales across various sectors, this rule would seem to leave those in lower earning sectors out in the cold.

 

It was reported last week that banks have been urging mortgage defaulters to seek a familial ‘dig out’ to help them meet their mortgage repayments.  These new tightened mortgage rules could now see buyers returning to the ‘bank of Mum and Dad’ model of purchasing in order to meet the deposit demand. It was recently reported that the Credit Union will be willing to allow parents to borrow significant amounts to assist with their children’s deposit as the prospective buyer themselves would be unable to take out a loan.

 

As the Capital Acquisitions Tax on gifts currently allows an un-taxed amount up to €225,000 we may well expect to see these rules also tightened. As it stands, without the addition of a parental gift the average couple can expect to be saving for at least four years to meet their deposit requirements for first time buying, whilst those trading up may well be reliant on these so-called ‘dig outs’ when they have outgrown their current dwelling.