SME bank lending still far from sorted in Ireland says Bernadette McGrory Farrell

The issue of Bank lending to the SME sector is still a hot topic, with seemingly conflicting views and experiences among SME owners. The latest SME Lending Demand Study for the Department of Finance is due out today and confirms this confusing and inconsistent state which already-stretched SME owners are forced to work with. Are the Government and the Banks still letting Irish business down? Or is the change just too slow to make a difference?

The Irish Independent’s Peter Flanagan writes today on the Report.

DEMAND for lending from small firms remains low, with barely a third of SMEs applying for loans so far this year, the Irish Independent has learned.

The latest SME Lending Demand Study for the Department of Finance, due to be published today, has found that only 38pc of small and medium enterprises sought credit during the six months between October 2011 and March this year.

That is only a 2pc increase on the previous survey, and follows a consistent theme outlined by the banks and the Irish Banking Federation, the industry trade group.

The report, which was compiled by the accounting firm Mazars, shows 67pc of credit applications that have been completed were approved by the banks, up 2pc on last year’s report, with the rate of refusals falling by a corresponding amount to 28pc.

Despite the downturn, the report indicates some companies are still in a position to protect their finances from potential future problems.

Nearly a fifth of those companies which had their credit applications approved, did not draw down all of the facility made available to them.

The study highlights “continued difficult trading conditions” in the SME sector, but adds that the macro-economic problems are much more pronounced on small companies, with more than half of firms which have fewer than 10 staff reporting a fall in the turnover between October and March.

That is compared with only 41pc of the wider sector suffering from falling sales.

Surprisingly, given the wide perception that the banks are not lending, only a fifth of those surveyed said they had personal experience of the banks not lending.

The perception that the institutions are not “open for business” seems to be driven broadly by business representative groups and media coverage, Mazars say. They reported that 45pc of SMEs had developed the perception of a lack of lending from those sources, while 35pc had picked it up from peers in the industry.

The report highlights a number of points for “further consideration”.

Among them are the need for the banks themselves to encourage SMEs to apply for credit and not base their decision to apply on trade groups which are highlighting a lack of lending.

It also claims that a response to property debts will be “fundamental” to “right-sizing” SME debt levels, given the amount of firms caught up in property problems.

The banks are also dragging their heels on making a decision on an application, with only 60pc of them approved or rejected within 15 days.

Over half of businessmen who have their loan applications rejected believe the banks have changed their lending policies, highlighting the remaining need for the Credit Review Office to adjudicate on rejected loans, Mazars add.

It seems that this important element of doing business in Ireland as an SME is still far from sorted. 

General Overview of Research and Development Tax Credit available in Ireland as of March 2012.

(1)  It is available to Companies only

(2)  Activities that qualify – in addition to the generally assumed white coat brigade activities like pharmaceuticals – the following areas could qualify – software development / food production / engineering / health and agriculture / natural sciences. 

(3)  So what is an R & D activity that qualifies – to quote Revenue : must be systematic in a field of science or technology involving research and seeking to achieve a scientific or technological advancement and involving the resolution of a scientific or technical uncertainty. In particular activities aimed at producing new or improved materials / products / devices / process systems or services can qualify – e.g. designing and implementing a new waste management system / adapting or improving equipment added to a processing line that greatly improves and streamlines the process / developing a new product – all could qualify for relief. 

(4)  How Credit works – (a) in general excess of expenditure in any year over the base year (2003 as set) will attract an additional 25% tax credit i.e. over and above normal CT relief of 12.5% e.g. R & D spend 2010 €125,000 – base year 2003 was say €50,000 – relief of €75,000 x 25% now due = €15,000 (this is in excess of normal deduction anyway for 2010 of €125,000 x 12.5%. Of course if 2003 was NIL or company is relatively new all expenditure will qualify. 

(5)  No CT liability? – from 2009 a claim can be made for a cash refund where say trading losses were incurred – in this case the refund is spread over 3 years  

(6)  Budget 2012 amendment – a volume based approach has been implemented for €100,000 of expenditure i.e. first €100,000 of R & D expenditure in 2012 will qualify for the extra 25% relief irrespective of 2003 base year expenditure – only excess over this limit will need to refer to 2003 – this is a boost for SMEs where level of expenditure in any year may not exceed 2003 level and can result in extra €25,000 tax credit being available. 

(7)  What expenditure qualifies – it can be either Capital or Revenue i.e. on buildings / machinery / salaries / overheads etc. attributable to R & D. 

(8)  In house or sub contracted expenditure – if sub contractors used this area of claim cannot exceed 10% of in house expenditure – however under Budget 2012 this is recognised as a restriction on small companies lacking internal expertise and accordingly the greater of €100,000 or 10% now applies subject to the fact that such claim cannot exceed in house expenditure.


These are guidance notes and professional advice should be obtained before commencing any R & D project or making a claim to Revenue.

Contact Paul Farrell or Tony Mallon on 041 9836707 or to enquire if you are elligible for this Credit.

Check out for information on this and other supports available to you.

William McGrory with all the Clondalkin Office business owners and staff.

Here Bernadette McGrory Farrell of W.O. McGrory & Company continues her look at key business management issues for achieving success in today’s uncertain business climate.

Over the almost 40 year life of our 2nd generation Accountancy Practice we have identified these ten pitfalls as common to almost every small business.

 1.    Cash Flow Problems         6. Overtrading

 2.    Lack of Capital                  7. Costing and Pricing Issues

3.    Annual Accounts               8. An Inability to Generate Sales

4.    ‘The Big Contract’             9. Practical Planning for Growth

5.    Small Customer Base        10. Excessive Personal Drawings

In last month’s article I looked at the importance of recognising what stage in its life-cycle your business is at and what its key requirements are, and how you can use your accountant to help provide you with the management information you need. Here I am going to look at Pitfall 1.

Pitfall 1          Cashflow Problems

First this month, I want to explode a popular myth. The myth is that a profitable business will always survive. Not so. Cash is king. Profit is no good if it is tied up in stocks, debtors, work-in-progress or equipment. Managing your cash flow is the single most important factor in surviving in business. This means having tight control over your debtors, over your stock, over your expenditure, and over your bank balance.

If making or providing your product or service is the engine of your business, then managing your working capital is making sure the engine of your business has oil in it. Firstly let’s get rid of the jargon. Working capital simply means the amount of money that is invested in your stock, your debtors (money owed to you for sales), your creditors (money you owe for raw materials/consumables/taxation), and your bank balance. This is a circular relationship. If you are holding too much stock for too long, not collecting in the money owed to you fast enough, then the profit you think you are making in your business is no good to you.The other half of the working capital circle is paying your creditors and getting money into the bank. If this is not happening you could be profitable and still find your business in serious trouble.

The key tool for managing this is drawing up a Cash Flow. Your accountant will help you with this. Keep your cash flow document up to date and keep it live. This document ’does what it says on the tin’, it is the best way of ensuring that cash flows through your business and doesn’t get stuck in stocks or debtors. It forces you to plan and forsee how expenditure will occur and to recognise the difference between the cash that belongs to the business and the cash that is yours.

Use the resource that is your accountant to help you with this area. Your accountant will only be too happy to work with you to ensure you have the best information so you can keep your business on a straight path in these uncertain times.

Go to for more information.

Managing Your Business in Uncertain Times

Knowing how to manage your business through these uncertain times is arguably one of the key skills that all business owners need today, but few may have. Here Bernadette McGrory Farrell of W.O.McGrory & Co has outlined some of the main points you need to be aware of to know you are successfully managing your business.

Firstly, know what stage your business is at, know what information you want to have at your fingertips, and be willing to work with your accountants, not against them.

So, what stage is your business at?

If you are still in the start-up phase, 1 to 3 years, typically you are

  •  A one man band
  •  Under capitalised, which means not well financed at the start
  •  No financial reserves to fall back on
  •  Inexperienced in being in busine
  • Trying to cope with everything
  • Still establishing a place in the market

If you are in the 3 to 5 year stage, typically you are

  • Learning how to manage employees effectively
  • Learning to delegate, which most business owners struggle with
  • Coping with rising overhead costs
  • Overtrading, where your business grows quicker than your profits
  • Doing crisis management

If you are in business between 5 to 10 years, typically you are

  •  Financing expansion and growth
  •   Trying to maintain competitiveness
  •   Controlling a growing business
  •    Struggling with indecision on the future path of the business

Recognising which stage your business is at is crucial to knowing what information and support systems you need in place to successfully manage it. Your accountant is the single most important element in putting in place a workable effective control system for your business.

So how do you deal with your accountant?

Do insist on jargon free explanations of all financial information

Do be clear what the key cost and income drivers are within your business and ask to have a simple financial recording system to monitor these key figures

Be willing to keep detailed records of all transactions in the business

Keep your accountant informed of all developments or changes within the business

Be willing to set annual/quarterly targets and to monitor progress

Provide your accountant with accurate stock/work-in-progress figures for management accounts

Your accountant should be providing you with

  • monthly/quarterly management accounts, detailed margin analysis, and ,comparisons against budget.
  • Budgeting and financial planning information
  • Capital investment information
  • Dealing with banks and other lenders
  • Dealing with the Revenue Commissioners and Companies Registration Office.

 Remember, a one-page summary of the key figures in your business is all you need on a monthly basis, you don’t need management accounts running to 6 or 7 pages simply because it is easier for your accountant to use the same format as the annual accounts. Have a one page report, which tells you what you need to know. Your accountant will help you decide what is most useful for you.

 Here is an example of what you might use as a one page report. But design your own, make it exactly what you want for your business.

        Summary of Critical Items for Financial Management Information

                                                             Current           Year            Previous

                                                              Period            to Date       Year to Date

Sales net of vat

(by key analysis if relevant, e.g. geography/produts etc)

Cost of Sales - analysed over key items

(e.g. Materials, production wages, consumables etc

each expressed as a percentage of sales)

Gross Profit and GP percentage

Key overheads (as a percentage of sales)

Net Profit (as a percentage of sales)

Debtor Days

Creditor Days

Stock Holding Days

Bank Position

PAYE/PRSI/VAT liability

Bank Loan repayment/balance

The above is a list of the standard items which should be on a one page summary of your financial information. If you prepare budgets each year then a column for budget and variance from budget should be included. In looking at the range of information which different businesses want to have included on a financial management report, the key is that if it is relevant to your business then include it, if n ot leave it out. The main thing is to keep it simple, otherwise it won’t get done.

Check out for more advice on this.

Funding Available Under Louth Leader Partnership

Under the Rural Development Programme 2007-2013, Louth Leader Partnership have funding available which will expire in 18 months.

Who can benefit from the Rural Development Programme 2007-2013?

  • Individuals or groups of promoters with a viable enterprise idea.
  • Rural Businesses wishing to expand or diversify, or start up a new business.
  • Farm Families wishing to diversify into new activities.
  • Community Groups promoting community enterprise, local amenity projects.
  • Voluntary Organisations or special interest groups promoting social, cultural and environmental projects.

Call our Drogheda office on 041 9836707 and speak to Tony for more information on this opportunity. We can guide you through the process of exploring how you might be able to benefit from this funding in developing your business.

McGrory & Co took part in the recent Irish Furniture & Home Accessories Fair 2011 at the RDS. We were there as resident Experts providing Accounting and Business Management advice and assistance to all those attending the Fair. Our theme was Managing Your Business in Uncertain Times. Here are some pictures of our stand over the 4 days. Also congratulations to those who won the Blackberry Curve phones each day in our competition.

Key questions which came up over the 4 days included R&D tax credits, manufacturing tax reliefs, getting credit facilities with banks, and managing a business in a recession. A very useful and enjoyable event. More on the way.

New look website for

Check out our new website at,  redesigned and more user-friendly. It’s full of helpful information and advice on what your accountant can do for you, and how you can make the best use of your accountant as your first point of reference for your business.

More posts coming soon as we upload information on some of the events we’ve been involved in over the past few months, and we’ll keep you up to date here on relevant articles and news items that we think might be of interest for your business.

5 Ways to Improve Cash Flow in a Recession

Cashflow is the life blood of any business. With limited credit available from the banks conserving and the freeing up of cash in a business has become a key objective for many entrepreneurs and small businesses, says Paul Farrell, Partner, W.O. McGrory & Co the Drogheda based accounting firm.

Paul explains: “For any businesses, cash has always been a priority. The benefits of effective cash management and cost reduction are obvious, but never more so than at the moment.

“We’ve compiled a list of 5 simple ways to help businesses free up cash in these recessionary times.  Some may appear basic common sense, but surprisingly can often be overlooked in favour of far more complex money-saving initiatives.”

• Customers – Keep in more regular touch with your customers. Pay particular attention to those already outside agreed credit limits. Ensure that overdue accounts are chased quickly, but fairly.  Consider offering improved prices or bulk discounts in order to reduce stocks without damaging the trading relationship.

• Suppliers – talk to them, discuss extending payment terms.  Whilst they are likely to be under pressure too, if you are a reliable customer with a good payment history, they may be willing to temporarily relax payment terms.

• Bank Financing – Keep communicating with your bank. They don’t like surprises so keep them informed and don’t be afraid to discuss additional funding if you have a plan or an immediate need, but always think ahead;

• System Review – Do you know how your business is actually run from beginning to end? Do you know what’s happening with every penny in your business, or more importantly, that you have the ability to find out.  A good accounting system will pay for itself in no time. There are currently excellent deals on accounting software to assist in this regard.

• Costs/Overheads – are there areas of the business that excess fat that can be trimmed?  These may not be immediately apparent but a review of the business can identify opportunities that won’t adversely impact performance;