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REFINANCING – COVERING YOUR ASS..ETS

After suffering through some harsh financial times in recent years, when we hear phrases such as cash flow boosting, restructuring and refinancing one of two feelings may occur to us. We either are stricken with more fear than that which occurs on Sunday evenings as we imagine all that we have built into our company walking out the door on us (“anything but the beanbags please, they are our only link to trendiness!), or the clouds part and we may think we hear the angelic chorus of our financial salvation.

 

The refinancing of assets sounds like a dangerous road to go down, and can inspire more than a bit of hesitancy when the idea is brought up, but restructuring and refinancing of your assets may be the one thing standing between your business and the ultimate success of overcoming financial obstacles. In recent years it has been found that this unlikely alternative can ultimately help businesses in financial difficulty, in particular SME’s to survive through tough times.

 

The refinancing of assets involves financing assets you already own in order to unlock some much needed cash flow over a period of time. The money borrowed in this way is secured against the value of the existing assets. The cash tied up in these assets is then released in order to allow these funds to be utilised in other ways. This may involve the restructuring of existing loans and the setting out of a new repayment schedule, perhaps extending the period of an existing loan. Refinancing can be an excellent way of unlocking cash from assets you already own such as company cars or general machinery and equipment.

 

Many SME owners may not be aware that this is a viable option for their business to boost cash flow and engage in new opportunities. Whilst refinancing at the present moment may be primarily geared towards the SME market, it isn’t just an option for SME’s. The refinancing of assets is also suitable for larger companies who already have strong assets, as this can generate some extra funds that may ease any financial pressure.

 

Of course, refinancing does come with its own set of risks and you must seriously consider your repayment options and capabilities before engaging in this activity to ensure that you do not set your business up for further complications down the line. Once you confirm your repayment abilities and set out a plan you are comfortable with, this can be an easy way of freeing up cash within your business at a time when it might be most needed, allowing you to invest further in important projects or perhaps even take on new and exciting opportunities.

 

If you are interested in refinancing some existing assets within your own company, or just curious as to how you would go about this give us a call here at DCA Accountants and we would be glad to talk you through your options.

BUDGET 2016: WHAT DOES IT MEAN FOR SME’S AND THE SELF-EMPLOYED?

It has been reported that SME’s now account for an enormous portion of all enterprise in Ireland. Unfortunately, SME’s and the self-employed rarely see their efforts being rewarded in any way when the time of the budget rolls around each year. Was the budget for 2016 any different? We have compiled some of the main changes that will affect both SME’s and the self-employed for your reference.

Self Employed Tax Credit               

 

It was announced in Budget 2016 that there would be a new earned income tax credit of €550 available for those who are self-employed, including farmers. Whilst this is still quite far behind the tax credits available to others, it is somewhat of a beginning for the process of not alienating the self-employed through taxation. It is suggested that this figure would be increased in future years.

Capital Gains Tax Reduction

 

There will also be a very welcome reduction in the Capital Gains Tax for 2016 for the self-employed and entrepreneurs. This reduction takes the tax from 33% to 20% on a gain up to €1 million, which could have significant positive consequences, despite still remaining quite far behind the UK and the North of Ireland in relation to this tax. The expenditure cap for Film Relief has also been increased to €70 million which is good news for this sector.

Farmers

 

Farming in particular was a sector which was more acknowledged in this budget than previous, as the general stock relief and the stamp duty exemption for young farmers was extended to 2018. It was also announced that a new succession transfer proposal would be put forward in order to increase certainty for the next generation of farmers and assist with a more long-term thinking that may not have been possible previously.

Microbreweries

 

Another sector of self-employment and SME’s that was newly acknowledged in Budget 2016 was the increasingly popular microbreweries. The excise relief for microbreweries will now be made available upfront. This is welcome news for the industry as it may help to free up some much needed cash flow which is always important for these SME’s.

In Conclusion

 

It is also hoped that the reintroduction of the Social Welfare Christmas Bonus of 75% will boost sales and income for SME’s, thus generating more revenue overall.

 

Unfortunately there have been few steps taken to support entrepreneurs in particular. Whilst these measures for the self-employed and SME’s in particular are small steps, at least these steps are finally being taken in the right direction and we would hope to see an end to the previous discrimination against these sector in future budgets, as SME’s begin to form the backbone of our modern economy.

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.