While the first port of call for funds is traditionally the bank, this may not necessarily be the right option for companies taking a strategic approach to debt.
Proceed with caution is the advice of Richard Duffy, director, deal advisory, BDO. The type of finance a business requires, he says, is wholly dependent on where it is in its life cycle. “It depends on where you are with the development of your business and the capital structure of your business at the time you go to raise finance,” he explains.
Borrowing is only the right choice for companies when it funds growth opportunities, such as expansion or acquiring assets, or when it provides flexibility to manage cash flows.
“However, borrowing is only sensible if the business has stable, high-quality cash flow and can comfortably afford the loan repayments,” Duffy warns. “You need to be certain when burdening the business with debt that it will generate a greater return than its costs.”
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Matching the right funding source to the right project is key, short-term finance for short-term issues and longer-term funding for larger, more capital-intensive projects. Clarity on this is important, as there are more debt funding options available than any time in the recent past, Duffy points out.
And while banking finance dominates the thinking of most business owners, he advises that early stage, immature businesses or those with highly unpredictable cash flows may find it difficult to meet the regular, fixed repayments nature of a banking loan.
This is where alternative, non-bank lenders come in. According to Laura Holtham, banking and finance partner with Ogier, the general trend is that traditional banks are “retrenching” from the deals they used to do. “So non-bank lenders have stepped in to fill the gap – across both Europe and the US – and it’s increasingly getting to the point where non-traditional lenders will be the majority lenders for businesses, developers, corporate working capital and acquisitions,” she says. “There is still a place for traditional banks of course, but this new sector of lenders is firmly entrenched and not going anywhere. And businesses are much better served as a result.”
Holtham asserts that non-bank lenders offer speed of turnaround, flexible terms and are less stringent but it will typically result in more expensive debt than that from a pillar bank.
“Something the non-bank lenders are very good at is building relationships with their customers – businesses don’t tend to get lost in a big system,” she says. “Because they’re small, as a customer you’re speaking to the same person for the life of the loan.”
Mark O’Rourke, managing director of Bibby Financial Services, explains that non-bank lenders such as Bibby can provide tailored solutions such as invoice finance, as well as export finance and bad debt protection. “Unlike loans, overdrafts, or credit cards, invoice finance does not involve taking on new debt or monthly repayments, instead unlocking cash tied up in unpaid invoices,” he says. This can support day-to-day cash flow or enable growth activities including training, staff costs, equipment, premises, and strategic opportunities like acquisitions or management buyouts.
Despite these myriad funding options, according to Bibby Financial Services’ SME Confidence Tracker 2025, 48 per cent of businesses say securing funding has become harder in the past six months.
“These statistics highlight the importance of exploring sustainable, flexible funding options to support business growth,” O’Rourke says.
For early-stage or high-growth companies, alternative structures such as convertible loan notes may be an option, advises Robert Adams, chief executive and co-founder of Focus Capital Partners.
“These start out as loans but can convert into equity if certain conditions are met, usually tied to a future investment round,” he explains. “This can ease short-term cash flow pressure by delaying repayment obligations while giving investors potential upside if the business grows.” The trade-off is dilution of ownership, however, so businesses should take advice and ensure that this kind of structure aligns with their long-term goals, he warns.
Those who are confused by the range of finance options should seek independent help and advice, says Anna-Marie Turley, head of fintech, financial services and cybersecurity at Enterprise Ireland.
“Enterprise Ireland encourages a more strategic approach by offering tailored advice and structured supports to help businesses assess their financial needs and long-term goals,” she explains. “We encourage companies to evaluate the suitability of various funding routes. These include equity investment, grants, convertible loan notes, venture capital, and angels.”
The goal is to ensure that businesses don’t just take the easiest or most familiar path, she says, but instead choose a financial strategy that aligns with their growth potential, risk tolerance, and market ambitions. Enterprise Ireland also provides funding tied to development plans, which encourages companies to think beyond short-term cash flow and focus on strategic expansion, she adds.
“For example, a start-up might be tempted to accept a bank loan, but after consulting with Enterprise Ireland, they may opt to apply for the Pre-Seed Start Fund or if they have raised some funding they could evaluate High Potential Start-Up (HPSU) support, which offers convertible loan notes and equity investment with fewer immediate repayment pressures.”
Adams agrees that when it comes to choosing the right form of financing, knowledge is power. “By carefully assessing repayment capacity, evaluating lender options, and considering hybrid solutions like convertible loan notes, businesses can ensure that debt works for them, not against them,” he says.
O’Rourke echoes this. “Ultimately, borrowing is most effective when it supports strategic objectives, is manageable within cash flow, and is matched to the business’s stage, sector, and growth ambitions.”
