The Business Lending Blog

“The old saying ‘neither a borrower or a lender be’- well I am both on Linked Finance” (Paul Kerr, First Choice)

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Established in Limerick in September 2000, First Choice Financial Services Ltd comprises an expert panel of experienced industry veterans who provide a range of financial, insurance and life assurance advisory services.

Recently, a business opportunity was identified to acquire a second client insurance book to expand this portfolio. The required amount to get this up and running was €9000. On 7th March 2013 First Choice posted their pledge on Linked Finance and by 20th March they had reached this target therefore securing the necessary finance to carry out their objective.

With over 20 years working in finance, across a number of Irish banks and financial institutions, Paul Kerr of First Choice was particularly reflective about his recent experience: “As a banker & banking consultant I am very familiar with credit process and assessing traditional finance for SME’s. The key difference with Linked Finance is the visibility. At no stage in the process was I asked for additional information that I could not easily access. There was no faceless Dublin Credit Committee. It was a clear and easy process to get the funds we needed.”

For First Choice, the decision to raise capital through Linked Finance was by no means a last resort; Paul explains why as a business they were keen to go this route before exploring other financing options: “We could have raised finance from the bank or used our cash reserves. We wanted to try Linked Finance as the funding need matched the finance (a 3 year pay down) and to see how the process worked for our own clients.”

Paul is quick to allay any concerns that fellow SME’s may have regarding this type of financing: “It is a cheap and fun way to access up to €50,000 for your business, provided your business is viable and can demonstrate capacity to repay the funds required.”

However he does feel that this is suited to certain types of businesses: “Linked Finance is not for start ups and not for high risk ventures – it is for viable businesses that are social media savvy and want to leverage this to maximum benefit for their business.”

Paul explains how the €9000 was funded, and how subsequently the lenders will profit from their investment over the coming years: “We have over 50 lenders and they will get their capital and interest over the next 36 months from us. The funding cost was c.6.50% which will cost us under €1,000 over the term of the loan. If we get one new client from the 50 potential clients (lenders) then we will secure funding at zero cost.”

Following Paul’s interview on the RTE1 Pat Kenny Show last week, he says the reaction so far from the business community has been very encouraging, albeit certain family members may have needed a heads-up before the broadcast! Apart from my father-in-law hearing me on the radio about this and asking “did I need money” the experience has been nothing but positive! Thankfully I am in a business that is solid and viable and I did not need to access finance from friends or family.”

We wish First Choice, and all its lenders, every success with this new venture, and look forward to hearing how the company progresses in the years to come. Asked if he had any final thoughts on the matter, Paul was keen to advocate the Linked Finance approach: “I think this is a great business model which warrants support from all of us.”

You can view other examples like First Choice in the Marketplace area on Linked Finance here:

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