Before you apply for a business loan in Ireland, you should consider a few things that will increase your chances of getting the money.
There are three main types of finance for most businesses:
Debt: The business borrows from an external source to meet its business needs
Equity: Part of the ownership of the business is sold in return for cash to support business growth
Cash: A business can also finance its growth through cash from the business owner, family or friends, or grants from government agencies.
Borrowing from a bank is a form of debt finance. There are several different types of finance, and which type you use will depend on whether the finance is for a short-term or a long-term use. The “golden rule” is to match the type of finance (short-term or long-term) to the intended business need (short-term or long-term).
Lending for short-term purposes adds to a business’s working capital. Two main types of working capital loans are:
Overdrafts
Invoice discounting
For long-term purposes, the most relevant forms of finance are:
Asset finance, which covers leasing and hire purchase arrangements
Term loans
Let’s look at each of these different types of finance in turn:
Overdrafts
Overdrafts are a short-term permission by a bank to a business, allowing the business to issue cheques or make withdrawals on the business current account, up to a specified amount (called an overdraft limit or permission). Interest is charged on a daily basis on the amount of the overdraft used. Generally, there will also be quarterly fees as well as an annual facility fee.
Most often, overdrafts are used by a business in managing its working capital and to meet very short-term financial need.
The main advantages of an overdraft are that they are usually easy to arrange, they do not have a fixed repayment schedule and you only pay interest on the amount of the overdraft that
