Accountants: Businesses cannot rely on banks for finance

Businesses seeking access to funds are being urged to look at alternative sources of income in light of the liquidity crisis facing the Irish banking sector.

Mr John White, President of the Institute of Certified Public Accountants, is encouraging small and medium sized enterprises to think outside the box and identify alternative sources of income, as the current lack of funding evident in Irish banks is unlikely to improve any time soon.

Mr White said: "It is alarming to note that in a recent survey of CPA practicing accountants almost 80% of respondents had witnessed a viable business getting into trading difficulties due to a lack of credit from their bank.

"Our members working with a wide range of clients across all sectors confirm the anecdotal evidence that a lack of credit is a significant issue for our economy. Clearly, the challenge facing both the Government and the banking sector remains considerable."

A recent report from the Irish Venture Capital Association (IVCA) showed that 86 technology companies successfully raised funding during the third quarter of 2009, up from 64 in the same period during the previous year. This would suggest that there still exists a range of investors looking for investment opportunities in Ireland.

Mr White explained how 'business angel' investing can reinvigorate this vital area

He said: "Angel investors can energize a business by providing investment in the early stages, with many angels typically investing sums of between €50,000 and €250,000."

Companies that typically secure investment have been in business for 3-5 years, have a well defined product or service and an existing customer base. Often they are looking for financing for the next stage of growth – be that in expanding into a new market, developing a new product line, etc.

"This year, there have been a number of cases in the of angel investors putting forward funds for very early stage - i.e. pre-revenue – enterprises, which indicates there remains a strong pool of possible investment financing in Ireland among private individuals, despite the fact that it is a high risk, high reward activity.

“CPA Ireland has strongly advocated the need for government support to assist our entrepreneurial sector – however in the absence of such assistance businesses are going to have to row their own boat if new business and growth of existing businesses in the SME sector is to be sustainable.”