Three priorities facing the incoming Government if it’s serious about safeguarding the future of Irish SMEs

Take the focus off FDI, improve access to finance and provide better independent financial advice – the three priorities facing the incoming Government if it’s serious about safeguarding the future of Irish SMEs 

Despite a complex year, from an economic and political view, it’s quite heartening to see that Irish business leaders are still positive about the future, with a recent survey by Bibby Financial Services showing that more than two-thirds expect sales to grow, more than half are planning to invest in their businesses over the coming months and just over one third are hoping to recruit in the next six months.

Despite the optimism, costs still remain a key challenge for businesses, particularly SMEs, as they are squeezing margins and dampening prospects for growth and business viability. And these cost concerns relate not only to macro-economic factors such as expenses impacted by global commodities or fiscal and monetary policy, but also the hidden costs of doing business such as late payments and bad debt.

As we await the final outcome of the general election, with the preferences of the Irish electorate shaping the composition of the next government, SMEs will be watching the outcome very closely as they will have many asks of the new Government. The overriding ask is that more needs to be done to support local indigenous businesses. Our recent survey shows that Irish SMEs feel extremely let down in this respect, with 52% saying the Government is currently doing more to support large foreign direct investment in multi-national companies than SMEs. The new Government must take decisive action to address this issue and create an environment where Ireland's SMEs can really flourish.

With one in three Irish SMEs saying they are just about breaking even (31%) in the current economic landscape, it’s not surprising that businesses are wondering why they are not seeing more action from Government to ensure the 250,000 SMEs that make up the backbone of the Irish economy not only survive, but thrive.

So how can the new Government address this issue? Our survey shows that a staggering 90% of SMEs feel a good starting place for the new Government would be to implement a full review of all the various supports they offer businesses to ensure they are fit for purpose.

The second priority should be on creating easier ways for SMEs to access finance to fund their business. While our research shows that businesses have the ambition and inspiration to grow, they don’t always have access to the finance required. One third (34%) of SMEs say their business has been rejected for external finance in the past 12 months. This goes up to 61% of businesses that have suffered from bad debt in the last 12 months, demonstrating the negative impact of bad debt on an SMEs’ ability to grow.

Of those that use external finance, 53% say they have experienced their incumbent bank or financier reducing the amount of finance or credit they have made available to them in the past six months. The top reasons given by banks or financiers for reducing finance are that the business is now considered high risk (38%), that they have inadequate collateral (30%) or that they no longer meet the financiers credit criteria (28%).

The third priority for the new Government should be addressing the serious lack of accessible information for businesses regarding finances. 65% of businesses say they wish there was more unbiased independent financial advice available online for SMEs, with just over half (52%) saying that if they had to find external finance, they wouldn’t know where to start, and 42% saying they don’t know who to trust for business financial information and advice. Our survey shows that when it comes to looking for information or advice on their business’s finance, 31% turn to Google or another search engine, while 24% talk to family and friends. It’s a shocking gap in knowledge that demands immediate action.

With businesses reluctant to take on extra unwanted debt, many are looking at more sustainable funding solutions such as Invoice Finance which allows businesses access to money outstanding from their unpaid invoices, helping them to access income they have already earned but not yet received – meaning you don’t have to borrow any money.

With more SMEs shifting to alternative funding options, such as Invoice Finance, there is an increasing requirement for more collaboration across traditional banks and independent financial providers to ensure we are learning from each other and, more importantly, are able to offer businesses a wider spectrum of funding options. Our ongoing partnership with PTSB to offer businesses access to the entire spectrum of funding options is facilitating this market trend. This relationship between one of Ireland’s leading retail and SME banks and a specialist lender is one of the first of its kind in Ireland and is currently transforming the Irish financial services landscape.

As we approach 2025, it is imperative that the new Government takes decisive action to safeguard the future of the vital SME community in Ireland. While there are encouraging signs of recovery, the fragile state of many small businesses underscores the urgent need for targeted investment from the Government.

By fostering a supportive environment that encourages innovation, resilience, and growth, the new Government can ensure that Irish SMEs not only survive the current economic pressures but thrive as a driving force for the nation’s long-term prosperity. Failing to act now risks widespread closures, which would have devastating consequences for local communities right across the country, as well as the broader economy. This is a chance to ensure this does not happen. Let’s hope the new Government understands this and doesn’t waste this chance.