SME Business Guide

SME Finance - Everything You Need To Know

What is an SME? 

Before we dive into SME Finance, it can be helpful to look at the definition of an SME. Guidelines for defining SMEs can differ globally. The European Union (EU) provides guidelines for defining small and medium-sized enterprises (SMEs) across its member states. 

These definitions are widely used for statistical purposes, accessing EU support programs, and determining eligibility for various incentives and benefits.


  • Number of Employees: The enterprise must have fewer than 250 employees.

  • Annual Turnover or Balance Sheet Total: The annual turnover or balance sheet total should not exceed €50 million. There's a separate, lower threshold for micro-enterprises.

  • Independence: The enterprise must be independent, meaning that no more than 25% of it is owned by one or more enterprises that are not considered SMEs.

Importance of SMEs to EU


SMEs are the backbone of Ireland and the EU, with 99% of businesses being categorised as an SME. They also represent 68% of employment in Ireland and 85% of new jobs in the EU. SMEs drive innovation and economic activity, fostering competitiveness and employment. 

SMEs are the engine of the economy

Why do SMEs need funding? 


It is normal for SMEs to require funding at some point during the business cycle. It can be either for growth purposes or day-to-day operations. Some of the key reasons why businesses need funding include: 


Start up funding

SMEs may need funding to launch their business, purchase initial inventory or machinery.

Working capital  

SMEs may need a cash boost injection to cover operating expenses such as payroll, rent, utilities and inventory purchases.

Expansion and growth 

Funding can assist SMEs to enter new markets, launch new product lines and invest in R&D. 


SMEs can benefit from increased customers, sales, revenue and brand awareness from investing into an effective marketing campaign. 


SMEs may need finance to support the purchase of inventory especially during peak seasons or times of increased demands. 


Regulatory licensing & compliance 

By obtaining regulatory permits, licences, certs , the business may incur large costs such as inspection fees or legal fees. 

Human Capital 

Funding can allow a business to support costs associated with hiring and training employees.



What types of funding is available to SMEs? 

Bank Loans 

Traditional loan options, such as loans from banks, are still popular options amongst SMEs. Traditional options are, however, risk averse and process inefficient. Some traditional lending options take 6-8 weeks to give SMEs a credit decision. In some markets, such as Ireland, there is a limited supply of banks (3) for 99% of businesses in the country.

Alternative Lenders

Alternative lenders popped up in the Irish market as a result of the global financial crisis. In 2009, there were 9 banks operating in Ireland. Today, there are just 3. Between 2009 and present, demand for credit remained while supply from banks reduced. Alternative lenders brought innovation and technological advances to the market. They may lend to businesses where traditional lenders will not and the speed to capital is greatly improved. 

Term Loans 

Term loans provide SMEs with a lump sum cash injection that is repaid in monthly instalments over an agreed period of time. 

Merchant Advance Loans

Merchant advance loans are suitable to SMEs where the majority of their sales comes from credit / debit card sales in person or online. Repayment of the loan is a % of the daily card sales instead of a monthly chunk. This option can be attractive to hospitality SMEs or those in retail. 

Invoice Financing 

This allows SMEs to access funding against outstanding invoices. This provides SMEs with immediate access to cash flow and helps SMEs manage working capital while waiting for their customers to pay. 

Asset Financing

This type of financing is suitable for SMEs who are interested in purchasing machinery, equipment or equipment. Common types of asset financing include: hire purchase and a finance lease. 

Government Grants 

Enterprise Ireland and the Local Enterprise Office have various grants and support for Irish SMEs to encourage R&D, innovation, exporting and job creation. 

Crowdfunding / Peer-to-peer

Crowdfunding allows an SME to access funding through large amounts of investors via an online lending platform. 


Santiago SME Finance

At Santiago SME Finance, we provide rapid finance to Irish SMEs. The application process is easy and we will provide you with a credit decision in 24 hours upon receipt of a completed application. We use technology to streamline the lending process and improve user experience. We have a helpful support team to guide you through the entire process.