FINANCE WORKSHOP AND NETWORKING EVENT - SYNOPSIS

Outlined below are the key messages from each of the speakers:

1. Welcome by Frank Ryan, CEO Enterprise Ireland

Frank Ryan welcomed participants and spoke of the high calibre of EI clients and their importance to the Irish economy. A supportive banking system is vital for Ireland’s exporting SMEs.

2. Maximising your banking relationship: key issues to be addressed and pitfalls to be avoided

Jim Deeney, who is a Finance Consultant with Finance One, explained the changed banking environment and the need to adapt in order to receive and retain bank finance. His key messages included:

o When requesting credit facilities from a bank, it is essential to provide a comprehensive information pack (including a credible business plan, historic financial information and forecasts), so that when meeting the bank the discussion is concerned with your needs and is not a “fact finding” mission

o Be proactive and manage your relationship with the bank - you set meeting agendas; assign meeting actions and set completion dates; provide information such as, monthly management accounts and explanations of variances against budget, without being asked. Bad news is better than surprises

o There has been a loss of expertise in front line bank staff as a lot of experienced bankers are working on NAMA and problem cases

o Substantial personal guarantees are normally required but typically not for the full amount of the loan - Examine offer letter properly, watching out for material adverse event clauses and when personal guarantees will be called. Some are very lengthy and may need to be read by an expert

3. Enterprise Ireland’s role in assisting Clients and Banks

Eamonn May, Manager of the Banking Relationships Department, Investment Services Division in Enterprise Ireland, explained that Ireland needs a banking system which supports exporting SMEs and outlined EI’s role in assisting clients and banks as follows:

o EI is working with individual clients in dealing with issues with their bank o EI is helping banks in Ireland understand sectors supported by EI in order to

maximise funding to clients o EI is engaging with overseas banks as a possible source of funds and as possible

bankers in export markets where EI clients operate o EI consider it important for clients to recognise that banks now require companies

to supply more detailed information

4. Case study dealing with a company which is applying to a bank for finance

Completing the case study emphasised the changed environment in which companies are operating. Even for a successful and profitable company, significant data is required, substantial security is needed including personal guarantees and the bank would require significant covenants.

The bankers in attendance endorsed the information requirements; agreed that it should be submitted to the bank in advance of the meeting; emphasised the importance of

monthly/quarterly accounts, together with variance analysis in order to have no surprises.

5. Credit Review Office – The role of the Credit Review Office (CRO) and the main issues facing SMEs in obtaining bank finance

John Trethowan, Head of the Credit Review Office, outlined that he is effectively a lending ombudsman. He summarised the background to his office, the cases he deals with and the results so far – his main points included o Since its conception, the CRO has received 37 applications. In instances where

the CRO found in favour of the applicant, the banks have to-date supported the CRO’s decisions and provided lending facilities

o AIB and BOI have improved their internal appeals procedures, in order to minimise cases going to the Credit Review Office

o AIB and Bank of Ireland are committed to lending €6bn each over the next two years

o Poor / badly timed business decisions, reserves tied up in non-liquid assets and poor cashflow forecasting have all contributed to the weakened trading position of a lot of SME’s

6. Tax, Finance and Cash flow Management

Andrew Cullen, President, Irish Taxation Institute, outlined opportunities within the tax system to maximise cash flow including:

o BES continues to be an important source of funds with 199 companies raising €62.3million last year

o Claiming bad debt relief as early as possible reduces VAT. There is a useful information leaflet on bad debts relief and VAT on www.revenue.ie

o The R&D tax credit is a 25% credit for incremental spend on R&D over the spend in 2003 and is generally refundable

o Employers’ PRSI is not payable for the first 12 months in respect of new employees who have been unemployed for 6 months

o There is a double tax deduction for wages paid in the first 36 months to a person who was unemployed for 12 months

o Regarding companies which cannot pay debts due to Revenue he emphasised the importance of engaging early with Revenue and the absolute need for cash flow projections

7. EI support

Leo McAdam, Manager of the Equity Department, Investment Services Division in Enterprise Ireland, Ireland outlined details of EI’s

o Financial support & services o Funding offer for 2010 o New programmes launched in 2010