Start-ups ‘gridlocked’ by lack of funds

Sunday Business Post - New Business Section - May 24 2009

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Start-ups and other small companies are "gridlocked" by a lack of available finance, according to Eilis Quinlan, the newly elected chairperson of the Irish Small & Medium Enterprises Association (Isme).

‘‘The absolutely crucial issue overriding everything else at the moment is cashflow,” said Quinlan. ‘‘That, teamed with the late payments issue, is absolutely grid locking a lot of companies. The money is just not moving out there.”

Quinlan, who has run her own accountancy practice in Naas for 17 years, said her primary objective in her new role would be to help Isme’s 8,500 member companies to get money flowing through their businesses again.

Stilted cashflow was forcing otherwise viable companies out of business, according to Quinlan.

‘‘Bad businesses will always fail anyway, unless they are particularly lucky,” she said. ‘‘They do not deserve to succeed. Good businesses, which have been operating for ten to 15 years, with fundamental good business models and tight ships, and which are not operating in areas of the economy that are defunct, cannot get paid. Their debtors are taking longer and longer and the banks will not extend their overdrafts.”

Quinlan said small businesses in Ireland faced a number of other challenges.

‘‘The loss of competitiveness is also a major issue,” she said. ‘‘The cost of doing business in Ireland has become massive - labour costs, local charges, fuel costs. For exporting businesses, the fall in sterling is an issue.”

Quinlan said start-ups, and entrepreneurs who might otherwise opt to set up in business, needed forceful action from the government.

‘‘General economic uncertainty is a problem. People do not know what the government’s plans are, or even what government is going to be there in six months. There is no idea in place of any sort of overall master plan.”



Quinlan established her own independent firm of chartered certified accountants and registered auditors in Naas in 1992.The practice employs ten staff to provide auditing services, taxation advice and management consultancy, primarily to SMEs.

Quinlan is a fellow of the Association of Chartered Certified Accountants, holds a certificate in computing from Dublin City University and has an accredited commercial mediator award from the Mediation Forum of Ireland.

Quinlan is also a committee member of Naas Chamber of Commerce, a member of Mensa and a member of the government’s SME Management Development Council. In her new role with Isme, Quinlan succeeds outgoing chairman JJ Killian, managing director of Clonmelbased Flancare Distribution.

‘‘I am a qualified commercial mediator, and I am an experienced liquidator, but more important than any of that is that I am actually an SME myself,” said Quinlan.

‘‘I am a small-time employer and a risk-taker. I understand the business risks, and I hope this will stand in my stead very well in my new role.”

Quinlan said there had been a rise in the number of new businesses formed so far this year, particularly by entrepreneurs made redundant as a result of the recession.

‘‘There are huge amounts of sole traders and small companies starting up, as people do not just want to lounge around on the dole,” she said.

‘‘People are taking the opportunity to set out on their own. A lot of these are highly educated and highly skilled people, who have been thinking about taking the leap for the last ten years.”

Redundancy may turn out to be a positive event for many of those now starting out on their own.

‘‘There are really positive aspects about owning your own business, so this push could be the best thing that could have happened for them,” she said. ‘‘Any SME owner manager will tell you that there is not much work-life balance during the start-up phase, but in the medium and long-term the payback is huge.”

Quinlan advised potential entrepreneurs, with viable business ideas, not to be disheartened by the current difficult-looking business climate.

‘‘My advice would be to go for it if you have a good idea,” she said.

‘‘Entrepreneurs have always been brave and willing to take calculated risks. There are always opportunities out there and there still are. HP and Nokia were both set up during recessions.”

Quinlan added difficult economic times could be advantageous for some new businesses.

‘‘The cost base, in some ways, is now relatively low,” she said. ‘‘Insurance costs can be found cheaper. You can shop around for things like fuel, and rents can often be negotiated down in the current climate.”

Quinlan added, however, that it was imperative that new businesses secured sufficient funding to get off the ground. Access to start-up bank credit was an issue for entrepreneurs at the moment, she said.

‘‘At the time I was setting out, it was easier to get bank support than at present. A bank will want to see the paper, and they will want to see the figures. I can totally understand that as even in the good times banks are entitled to reasonable projections and a master plan.”

Quinlan advised new business owners to seek support and guidance and not feel they had to do everything themselves.

‘‘Do not try and be everything to all people,” she said. ‘‘Reach out and get help. If you have an excellent idea that is your unique strength, do not be embarrassed if you do not know the financial rules or the legal end of things.

‘‘One phone call or e-mail to Isme and we can comeback with the right answer. The support that is available from us is worth ten times the cost of the membership.”

Quinlan said new start-up companies would create the momentum to lift Ireland out of the economic doldrums.

‘‘Small businesses are the lifeblood of this economy,” she said.

‘‘When things get rough, your corner shop or local boutique or garage does not up sticks and move to another country. We are very adaptable and we can change direction quickly.

‘‘We can take setbacks on the chin and come back for more. In a way, we are much better poised to react to things as they happen than bigger business is.”

More government assistance is needed to improve credit access for small and medium-sized businesses, said Quinlan.

‘‘A government commitment to promoting SMEs would help,” she said. ‘‘The banks say they are lending, but we have seen no examples of that, I am afraid. Isme was instrumental in securing €350 million from the European Investment Bank, but it is just not being passed on. ‘‘The lip service paid to an SME stimulus provision in the last budget was pathetic and heart-breaking.

[Minister for Finance] Brian Lenihan had one line about €50 million being given through Enterprise Ireland, but how much of that will filter down to SMEs?

‘‘Then you have to go through hoops and piles of paper to get anything. In the meantime, new and small businesses are failing. Liquidations are coming across my door every day of the week, including good, serious businesses.”