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Access To Finance SME’s

Looking For Growth But Need Cash & Help

Small and medium-sized enterprises (SMEs) are the backbone of many economies around the world, providing significant employment opportunities and contributing to economic growth. However, despite their importance, SMEs often struggle to access the finance they need to start and grow their businesses. This issue is particularly acute in emerging markets, where access to finance is limited, and the informal sector dominates economic activity.

This article explores the challenges faced by SMEs in accessing finance and the various solutions that have been developed to address this issue. It begins by defining SMEs and the importance of access to finance for their growth and survival. The article then examines the different types of financing options available to SMEs, including traditional bank loans, microfinance, and crowdfunding. It also discusses the role of government policies and regulations in facilitating access to finance for SMEs.

The article concludes by highlighting the need for continued innovation and collaboration between stakeholders to ensure that SMEs have access to the finance they need to thrive. It argues that addressing the issue of access to finance for SMEs is essential to promoting economic growth, reducing poverty, and achieving sustainable development. Access to finance SME’s can be a real challenge.

access to finance smes whats the catch

Access To Finance SME’s – Sources of funding for business growth

There are various sources of funding available to SMEs that can help them achieve their business growth objectives. Here are some of the most common sources of SME funding:

  1. Traditional bank loans: Banks offer loans to SMEs based on their creditworthiness and ability to repay the loan. This is the most common source of funding for SMEs and can be used for a wide range of business purposes, including working capital, equipment purchases, and expansion.
  2. Angel investors: Angel investors are high net worth individuals who invest in early-stage businesses in exchange for equity. They often provide more than just funding, offering valuable expertise and mentorship to help businesses grow.
  3. Venture capital: Venture capital firms invest in high-growth businesses with the potential for significant returns. They typically invest in businesses that have already demonstrated some level of success and require substantial funding to scale up.
  4. Crowdfunding: Crowdfunding involves raising small amounts of money from a large number of people via an online platform. This is a popular way for SMEs to raise funds for a specific project or to test the market for a new product or service.
  5. Grants and subsidies: Governments and non-profit organizations offer grants and subsidies to SMEs for various purposes, such as research and development, environmental sustainability, and job creation.
  6. Microfinance: Microfinance institutions provide small loans and other financial services to SMEs and entrepreneurs who do not have access to traditional banking services. This is a common source of funding in emerging markets.
  7. This website appears very useful

SMEs have various funding options available to them, and the choice of funding source will depend on their specific business needs and growth objectives. It is essential to carefully consider the pros and cons of each funding option and choose the one that aligns best with the business’s goals and vision.

When Is The Best Time To Approach A Lender For Finance?

As an SME, the best time to approach a lender for finance depends on your specific needs and financial situation. However, here are some general guidelines that can help you determine the best time:

  1. When you have a clear business plan: Before approaching a lender, it’s important to have a clear and detailed business plan that outlines your company’s goals, strategies, and financial projections. This will give the lender a better understanding of your business and increase your chances of getting approved for financing.
  2. When you need to fund a specific project or purchase: If you have a specific project or purchase that requires funding, such as expanding your operations, purchasing new equipment, or launching a new product line, it may be a good time to approach a lender.
  3. When you have a strong credit history: Lenders will typically look at your credit history to determine your creditworthiness. If you have a strong credit history and a good track record of paying your bills on time, you may be more likely to get approved for financing.
  4. When you have a steady cash flow: Lenders will also want to see that you have a steady cash flow and are generating enough revenue to repay the loan. If your business has a consistent cash flow and you can demonstrate that you will be able to make the loan payments, you may be more likely to get approved for financing.
  5. When interest rates are low: Interest rates can have a big impact on the cost of borrowing. If interest rates are low, it may be a good time to approach a lender for financing, as you may be able to get a better interest rate on your loan.

The best time to approach a lender for finance is when you have a clear business plan, a specific need for funding, a strong credit history, a steady cash flow, and when interest rates are low.

Access To Finance SME's blue dolphin
strategic marketing meeting blue dolphin

What Does A Lender Want To Know?

There is a variety of information that your bank will want

  • About You and Your business
  • Personal / Business investments
  • What is the purpose of the loan
  • How much money are you looking to borrow
  • Over what time period are you looking to borrow
  • Repayment approach
  • Note all of the above information should already be in your business plan / cash flow forecast

There are many online planning tools this is the  HSBC version

Inside Track To Bank Mangers

Some Bank Managers Are Encouraged To Work In Industry

Does Your  Bank Manager?

At a recent event I listened to a presentation by a Director of Commercial Banking. He gave an insight to the inner workings of a bank manager. Some of the points provided a useful background into their approach and expectations.
Interestingly in his bank they actively encourage their bank managers to work three days a year in business (i.e. outside of the bank environment to get a reality check of the outside world. These bank managers then actively work in these selected businesses (they are not just sitting shadowing). Part of the ethos behind this appears to be that as a bank they are looking to actively work with their customers and this is a way of demonstrating this in a practical way.

Access To Finance SME’s – Tips For Meeting With Your Bank Manager

  1. Always prepare an agenda in advance and submit this to the bank manager so that they have an insight into what you are preparing for
  2. The bank manager needs to have a knowledge of your business
    • What sector / sectors are you operating in
    • Who are you customers  (types / profiles)
    • Who are your competitors, not only direct competitors but indirect competition and potential future competition
    • Who is involved within your supply chain
    • Key financial information
    • Note: Expect your bank manager to be following you on Linked in and Twitter
  3. A shared relationship plan – how the bank and your business can work together
  4. Your bank manager should be offering you solutions  not products; so if they try and sell you insurance find another bank
  5. Your bank manager should be able to signpost you to alternative routes of finance if these will be more appropriate to your business needs

Ahead of any bank manager meeting

  • Prepare financials and forecasts
  • Ensure your business plan is current
  • Have an up to date SWOT / Porters 5 forces matrix
  • Identify any inherent risks that you face

Access To Finance For Smaller SME’s – Is Your Current Planning Falling To Deliver The Results You Want

For smaller SMEs (Small and Medium Enterprises) to access finance, there are several options available. Here are some of the best ways:

  1. Traditional bank loans: Approach your local bank or financial institution to inquire about loans specifically designed for small businesses. Prepare a solid business plan and financial projections to increase your chances of approval.
  2. Microfinance institutions: Microfinance institutions specialise in providing small loans to entrepreneurs and small businesses. They often have more flexible lending criteria compared to traditional banks.
  3. Government programs and grants: Many governments offer financial assistance programs and grants for small businesses. These programs aim to stimulate economic growth and support entrepreneurship. Research the available options in your region or country.
  4. Crowdfunding: Platforms like Kickstarter and Indiegogo allow you to raise funds from a large number of individuals who contribute small amounts. This can be a great option if you have a unique product or service that appeals to a wide audience.
  5. Peer-to-peer lending: Peer-to-peer lending platforms connect borrowers directly with individual lenders. They provide an alternative to traditional banking channels and may offer more favorable terms for smaller businesses.
  6. Angel investors: Angel investors are individuals who provide capital to early-stage businesses in exchange for equity or convertible debt. They often bring industry experience and connections in addition to financial support.
  7. Venture capital: If your business has high growth potential and scalability, you can seek venture capital funding. Venture capitalists invest in startups and SMEs with promising ideas and potential for significant returns on investment.
  8. Trade credit: Establishing good relationships with suppliers can lead to trade credit arrangements where you can obtain goods or services upfront and pay for them at a later date. This can improve your cash flow and working capital.
  9. Invoice financing: If you have outstanding invoices from customers, invoice financing allows you to sell those invoices to a third-party company at a discount in exchange for immediate cash. This can help you access funds before your customers pay.
  10. Bootstrapping: While not a source of external finance, bootstrapping involves utilising personal savings and reinvesting profits to fund your business. It requires careful financial management but allows you to maintain full control over your business.

Remember to thoroughly research and compare the terms and conditions, interest rates, and repayment schedules of various funding options to choose the one that aligns with your business needs and long-term goals. If you are looking for growth but struggling to identify how you will achieve this why not give me a call for a free impartial chat. The Growth Accelerator scheme may help you achieve the growth you are looking for simply call Andrew Goode on 01733 361729 or click here for more information

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