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Greater Diversity Of Funding Options A Must For SME's, Says SFA

The Small Firms Association has called for greater investment in small firms in order to encourage future growth, saying that equity finance is not used widely by Irish SME's.

The European Central Bank’s latest SAFE survey shows only 8% of SMEs used equity finance as a source of funding.

“Irish small firms rely heavily on banks as a source of external finance which makes them vulnerable to changes in the banking sector," said SFA chairman AJ Noonan. "As banks comply with more regulations, lending to SMEs will remain restrictive compared to the pre-crisis period. This is a problem and therefore, a greater diversity of funding options are necessary to ensure a constant flow of finance."

The SFA proposes that the new Local Enterprise Office (LEO) system should be used to inform SMEs and raise awareness of equity financing. It said that Venture Capital, Crowd Funding and Mezzanine Finance offer alternative forms of finance as SMEs business growth impacts on a firm’s propensity to seek alternative sources of funding.  

“Rapidly growing SMEs are likely to access a greater diversity of funding sources than slower growing or stagnant firms, because they are able to offer higher returns for the invested capital,” said Noonan.

© 2014 - Checkout Magazine by Stephen Wynne-Jones

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