March 25, 2009

Funding Small Businesses in Ireland — A Partial Solution

Posted in Your Ideas ·
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Ireland is full of entrepreneurs who are planning to set up small businesses, but simply cannot find the capital to get things moving. The same questions keep coming up, “How can I get angel investments?” “What government agencies will provide me with grant assistance or seed capital?”

The majority of people aren’t looking for large scale investment; they need €20K, €50K or €100K. They also aren’t looking to reinvent the wheel. They’re hoping to build businesses that would provide real value to their customers and a reasonable standard of living for them and their families.

The problem is that, while government agencies can provide some funding if you fall into a specific business category, they don’t have any more money now than they did last year. They can’t hope to fund the glut of new businesses. The same goes for the few angels in the country. There aren’t any more of them than last year, in fact there are probably significantly fewer, as a large percentage of their wealth would have been hit by either the property or the stock market crash. A lot of aspiring Irish entrepreneurs need to look at new avenues for raising capital.

So where can people turn for funding?

This may sounds drastic to some, but I think the answer lies in people’s pensions. Allowing entrepreneurs access to their pensions now would require a change in the rules, but that is something the government can, and may well need, to do. In the United States, this is nothing new, people can “invest in themselves”, using their 401K funds to build up their business, without incurring any nasty financial penalties.

This isn’t a solution for everyone, but a lot of Irish people have a reasonable sum of money, that they can’t get their hands on, locked up in their pensions. Typically, this money has been invested on their behalf by a fund manager in a combination of stocks and bonds — mostly overseas. I think that it makes sense, in the current economic environment, to bring this money back home and get it invested in indigenous businesses that can provide real growth for the country.

For those who think this is a drastic solution, let’s bear in mind that we are in drastic times and investing your pension into your business is a normal thing for entrepreneurs to do. It’s what I did and that was during the boom years. I deliberately didn’t pay into my pension for 7 years, saving the money in order to have the capital to set up my company, http://www.RevaHealth.com.

Of course this isn’t without risk — for those who fail it means the loss of a lot of money, intended to provide for their future. However, for others, it offers up the possibility of building a future for yourself that is within your control, not that of a pension manager.