Irish banks may be profitable again, but tight lending policies mean that it can still be difficult for small businesses to get the funds they need to survive and grow. Indeed for one Irish SME, difficulties in getting a credit facility from an Irish bank meant having to look across the Irish Sea to Brighton to secure the future of the company.

Founded in 1994 by Paul Tattersall, Power-Plex is an Irish electronic manufacturing and exporting company selling power supplies for security, CCTV, fire and access control applications.

“I set it up with a view to manufacturing specialist power supplies for the electronic security industry. The company grew steadily, and we started supplying customers in the UK, Europe and the Middle East,” recalls Tattersall. By 2008, it was employing 26 people, and 50 per cent of its business was supplying blue-chip companies. But then the recession hit.

Employment dropped to 13 as the company was hit with the full force of the downturn.

“Five of our distributors in Ireland went bankrupt, one in Finland and one in Spain. We were stuck for about €200,000-€300,000 in bad debts. It was a huge strain on our cashflow.”

The situation was complicated further by the fact the company had acquired its plant in Ballycoolin in 2007 for €750,000.

“We did it for our long-term future; we thought rents would continue to go up and we wanted control of our own destiny,” says Tattersall. But soon the property was “utterly insolvent”, with negative equity of more than €400,000. The decision was taken to split the company in two, with one company owning the building, and the other responsible for the main trading side of the business.

Subsequently, the bank sent in a receiver and, earlier this year, it sold the building for about €160,000.

Now the trading company is “solvent, viable and strong”, notes Tattersall, but the challenges didn’t stop there.

Last April, Danske Bank gave the company notice that Power-Plex would have to find a new bank by October as it was exiting the Irish market.

“We had been dealing with them for the last 20 years, and had invoice discounting, current account and corporate credit cards with them.”

Power-Plex turned to the two main domestic banks to try and strike up a new relationship. At several meetings, Power-Plex presented detailed business plans as well as a reference from Danske Bank.

While a current account was easy enough to obtain, lending facilities proved more difficult. Key to the discussions was an invoice-discounting facility that the company previously had for €300,000.

Power-Plex was turned down on the grounds the company’s turnover was “not of any interest” and, even if it was to grow, the banks would require the directors to take out personal guarantees.

“It was the same thing for corporate credit cards – but I’ve never given personal guarantees since I set up in business in the 1970s, and I’ve borrowed several hundred thousand. I’ve never had to put my family home on the line in a business that I’ve started; I’ve always refused to do so and it has not inhibited my business up to now,” says Tattersall.

“It’s utterly unreasonable,” he says, noting that such a facility is “critically important” to Power-Plex, and the company couldn’t have traded otherwise.

Tattersall says he does not think the issues with the property had any bearing on the banks’ decisions, as it related to a separate company. He did not pursue the decision with the Credit Review Office, as he doesn’t have “a great deal of faith in it”.

Banks and hostility

“If the bank doesn’t want to deal with you, they will put difficulties in your way one way or another. And there’s no sense in having a hostile relationship with the bank,” he says.

His impression is that the banks are “totally terrified of taking commercial risks”.

But relief was on the horizon. Advisers suggested an alternative – Close Brothers Invoice Finance in Brighton. “They gave us the €300,000 without personal guarantees, even though they’re outside the country,” he says.

Though the cost of the facility is more expensive than if an Irish bank had given it, with the facility now in place, growth is once more on Power-Plex’s agenda. “I’ve a great deal of confidence out there with regard to the future,” says Tattersall. But will he seek out a banking relationship again in Ireland? “I don’t think we’d be inclined to.”