Banks, how to engage and Alternative Finance Providers. Date: November 2015

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1 Banks, how to engage and Alternative Finance Providers Presented by: Tom Early Date: November 2015

2 Understand the Banks Perspective

3 Banks are concerned with REPAYMENT CAPACITY De-risking the proposition i.e. collateral / risk identification and mitigation Validation of information The entire relationship, including personal connections Return and theirs is limited Understanding the need financial information is NB but so is the story

4 Banks need

5 Bank Subjective Elements The following influences the credit grade / rating which influences access to finance and the margin Sector Experience Management background Succession plan Timeliness of information Competitive position Account behaviour adjustment Data reliability adjustment Age of financials

6 How SMEs should respond Engage fully with the bank - provide a comprehensive information pack Communicate the story behind the financials Be realistic - demonstrate need, repayment capacity and ways to mitigate risk Make the Relationship Manager (RM s) job easy Make the RM your advocate develop the relationship Provide information that validates claims Respond to information requests immediately

7 How SMEs should respond Negotiate encompass the entire relationship Challenge any decline decision with information especially if the overall exposure is < 300k Have a relationship with a 2 nd bank DO NOT LET THE ACCOUNTANT DO THE TALKING Regularly update and communicate with the bank even when you are not looking for money

8 Alternative Debt Providers

9 Rationale for the rise of IFP Banks want low risk Lack of information mean a proposal is high risk For smaller customers banks adopt a light touch high volume approach Less players remainder are refinancing those exiting Availability of funds is not an issue their perceived risk is Thus Lack of sector knowledge, access to easily verifiable comprehensive information and a light touch approach can result in viable propositions being rejected and no need for the banks to be innovative

10 Funding WC Then OverDraft Value Creation A/c Payable (Trade Creditors) Raw Materials WIP Cash THE WORKING CAPITAL CYCLE (OPERATING CYCLE) Finished Goods / Stock A/c Receivable Trade Debtors Sales

11 Funding WC Now OverDraft Value Creation A/c Payable (Trade Creditors) Raw Materials WIP Cash THE WORKING CAPITAL CYCLE (OPERATING CYCLE) Finished Goods / Stock A/c Receivable Trade Debtors Sales

12 So what does this mean for WC Production period Debtor period Stock Sale Made / PO raised Banks For Domestic Sales Raw Materials Purchased Non Banks Debt Finance Tower Trade Raw Materials Delivered Banks view as high risk security required For Export Sales Goods Finished Goods delivered & Invoice raised Banks view as high risk security required / onerous terms Bibby Convertibill Trade Team Global Celtic Invoice Fair Aztec Banks view as low risk Customer Pays Aztec Bibby Interface Catalyst Celtic InvoiceFair Close Convertibill

13 Overview of Providers Products

14 Overview of Providers Products Pre-Shipping Finance Stocking Supplier Purchase Order Post Shipping Finance Invoice Discounting / Finance sell the Debtor book Single Debtor Sell an individual debtor Single Invoice Once off sale Reverse ID Longer Term Finance Term loans & leases

15 Overview of Providers Working Capital Long term Pre- Shipping Post Shipping Single Provider Term Asset backed Lease Stocking Supplier Finance PO ID Debtor ID Single Invoice Bonds Amounts considered Bibby Financial services > 50k Close Brothers >100k Convertibill > 10k Aztec Finance > 30k InvoiceFair > 50k Celtic 200 to 200k Interface finance 5k upwards Catalyst finance > 10k Grid Finance <75k Linked Finance <50k Co-Funder GRENKE 1k to 500k Fexco > 5k to 1m Finance Ireland > 5k to 1m SME Finance & Leasing Solutions Limited 1k to 10k Leasing Company of Ireland > 5k Crossflow Lighthouse Varies Finance One Surety bonds NA Microfinance <25k Trade Team Global > 50k Tower Trade Finance Ireland > 10k Bluestone Bluebay > 5m

17 Thanks Tom Early Enterprise Ireland The Plaza East Point Business Park Dublin 3 T: E: tom.early@enterprise-ireland.com

Welcome To. Growcap Finance

Welcome To. Growcap Finance Welcome To Growcap Finance A changing environment.. USA Ireland Freeing Up Working Capital Pre-Shipping (Supply Chain/ Trade Finance) Stocking facilitates the purchase of stock for planned sales PO finance