NI Businesses have more funding options than ever before

It is no secret that the Northern Ireland funding landscape has been evolving for many years and continues to do so today.

In the wake of the last financial crisis, banks’ appetite for risk changed, which left many business customers looking for funding that was no longer as readily available as it had been from traditional sources. Previously, businesses would have had a cradle to grave relationship with their bank, but this change in appetite made them more open to switching banks, entertaining the idea of being ‘multi-banked’ and also seeking new and alternative funding options beyond the traditional high street lenders.

In response to these challenges, in 2012 a gap was identified in the funding market from which the original Whiterock Finance offering was born in the form of the Growth Loan Fund I to provide mezzanine finance to trading businesses.

Until this point, there was little understanding of mezzanine finance in Northern Ireland, but now having fully deployed Growth Loan Fund I, Whiterock has successfully raised two successor funds to date. We discovered a further gap as eligibility criteria for existing debt funds excluded certain sectors, most notably support for non-trading business related property transactions, which led businesses to explore alternative options.

Within the last decade a range of alternative funders from GB, Ireland and beyond have shown an interest in the Northern Ireland market providing additional potential funding partners for NI businesses, often working alongside local banks. We act as a conduit for borrowers using our relationships with funders across NI, GB and Ireland to match the risk appetite of funders to the requirements of individual property projects.

The world now looks at Northern Ireland as a leader in the tech and IT industry, and this has drawn attention to the wider business community and allowed the region to become more attractive from an investment perspective. In the property sphere, we have been involved in brokering deals that have transacted with funders from NI, GB and the Republic of Ireland in recent months.

For instance, we recently acted for a NI based Property client on an €8m deal on a zoned landbank purchase in the Republic of Ireland with finance secured from an alternative funder. This transaction was a prime example of why companies choose to source debt from alternative funders. Without full planning permission in place, this type of transaction would normally be deemed too high risk for a mainstream bank, but with the right deal structure in place an alternative funder is more likely to invest in projects that are at an earlier stage or have a more complex risk profile.

Another reason businesses benefit from doing business with alternative funders is the ability to transact at speed which is particularly beneficial for residential development funding. We have a number of live funding mandates for residential development schemes, and while there is clear interest from a small number of traditional banks in NI, there is a growing number of alternative lenders who have strong appetite for this sector and can move quickly. This is now more crucial than ever given the continued uncertainties around both build costs as well as any potential future slowdown in sales prices.

When seeking higher levels of funding, companies may think banks are their only option, but we are currently in discussions around the £20m refinance of a multi-let office building in Scotland focusing on alternative funders. Finding the right funder for more complex transactions can be a challenge, but it is possible if businesses explore all the options available to them.

However, this move towards alternative funders doesn’t mean that there isn’t still a place for traditional bank debt. We have been involved in several mainstream bank funded transactions over recent months including the acquisition of an iconic NI hotel, the refinance of a number of local NI SME’s between lenders, refinance of various buy-to-let properties and the acquisition of a Scotland based caravan park.

Businesses in Northern Ireland are ambitious, and many have their sights firmly set on growth, but when seeking to finance this growth, they need to shop around and explore their options particularly when their funding needs may not match the risk appetites of local banks. The funding landscape is changing and growing and new lenders have the desire to invest in Northern Ireland.