More funding options than ever but scaling gap remains
The venture capital industry hopes Budget 2027 could improve R&D and innovation incentives
Businesses need access to external capital for a variety of reasons, whether it’s funding day-to-day operations, entering new markets, capital investments, acquisitions, restructuring and much more. That capital can take many forms – bank borrowings, invoice finance, State grants, private equity and venture capital, and even floating on the stock market.
But what is the state of the market for Irish companies seeking to raise capital? Steve O’Callaghan is the director of the MSc Corporate Finance at University College Cork, and he says recent improvements in Irish businesses’ access to finance are now running into headwinds.
“Gross new SME lending rose 9.4 per cent quarter-on-quarter in the first three months of 2026 and the latest Central Bank figures show credit sources diversifying, with non-bank lenders accounting for 36.5 per cent of new SME lending in 2024,” O’Callaghan says. But he points out that borrowing costs remain stubbornly high; Central Bank [of Ireland] data put the rate on new business loans at 5.22 per cent in June, against a euro-area average of 3.72 per cent. Meanwhile, the ECB [European Central Bank] continues to raise interest rates.
Freddie Saunders, director, PwC Ireland Corporate Finance agrees, saying capital remains available for strong Irish businesses, but the market has become more “selective” over the past 12 months.
“Funders are placing greater weight on cash generation, resilient margins and a credible route to growth, while diligence and execution remain disciplined,” he explains. Bank lending continues to support established companies, with private equity, private credit and other alternative providers broadening the options for acquisitions, refinancing and expansion. “But availability and terms still vary significantly by sector, risk profile and stage of development,” Saunders adds.
“For many SMEs and early-stage companies, the biggest obstacle is the gap between the capital they need to scale and the funding available at that stage.”
Katharine Byrne, a partner in BDO Dublin, is more optimistic, although she acknowledges the aforementioned “selectivity”.
“There are more funding options than ever before, with private equity funds, growth investors and alternative lenders actively seeking investment opportunities in the Irish market.”
What’s clear, she says, is that these funders are focusing on scaling businesses with strong management teams, clear growth strategies, resilient earnings and robust financial reporting.
“Overall, market sentiment is more positive than a year ago, with well-prepared established companies continuing to attract capital, but there is still a gap in the market to help scaling and early-stage companies,” she says.
Byrne adds that a recent report commissioned by the Department of Enterprise highlighted a funding gap of more than €1 billion for scaling Irish companies over the next three to five years.
O’Callaghan echoes this, suggesting Irish companies’ biggest financing problem may no longer be simply the cost of borrowing. “Rather, it is the relative scarcity of domestic capital once a business outgrows a bank loan or an early venture round,” he says.
“Ireland has not built a deep pool of indigenous growth equity, while its public market offers limited support and pension funds allocate only a small share of their assets directly to Irish companies.” This means a company seeking funding to expand internationally, or a credible public market exit for early investors, will often have to look abroad.
“For many SMEs and early-stage companies, the biggest obstacle is the gap between the capital they need to scale and the funding available at that stage,” says Saunders. In addition, recent investment has been concentrated in a relatively small number of larger rounds, leaving many viable businesses competing for patient growth capital.
Companies need to get the right advice at an early stage to ensure they understand their options and the time it takes to raise the capital, Byrne notes. “All funders are undertaking deeper diligence and placing greater emphasis on earnings quality, management capability and a credible growth plan.”
The recently updated Ireland for Finance Vision 2030 strategy was warmly welcomed and includes specific aims to boost funding access, Byrne explains. “This is through three key areas, including modernising the Limited Partnership Act 1907 to unlock private credit, venture capital, and private equity for SMEs and infrastructure, Enterprise Ireland strengthening start-up funding hubs and an update of the legislation to enable digital fund tokenisation for alternative capital raising.”
“Delivery of the strategy will be the real test, and its impact will depend on effective co-ordination between Government, regulators and industry, supported by clear accountability and transparent measurement of progress,” adds Saunders.
More imminently, the hope is that the upcoming budget could make some progress on business financing. “Business groups want the 33 per cent capital gains tax rate reduced for investments in unquoted businesses and the €1.5 million lifetime limit for Entrepreneur Relief increased further,” notes O’Callaghan.
Budget 2027 could also help through targeted improvements to R&D and innovation incentives and measures, adds Saunders; these would encourage entrepreneurs and investors to reinvest in Irish businesses, helping more companies fund innovation and scale.
The venture capital industry wants something more structural, notes O’Callaghan: a Government-convened fund-of-funds capable of mobilising an initial €1 billion from institutional investors, including pension funds, for indigenous businesses. Industry groups are also recommending significant simplifications and reforms to the Employment Investment Incentive Scheme (EIIS) to better support SMEs.
“It remains to be seen whether recent expansions of EIIS and other investor reliefs can materially narrow the scale-up funding gap those measures are intended to address, however,” says O’Callaghan. “Until that gap closes, Ireland will remain a challenging home for scaling businesses.”
