SME finance in difficult times
The writer

SME finance in difficult times

SME finance refers to the many financial channels and resources that assist small and medium-sized firms in acquiring the cash needed to start, operate, and develop their company.

These enterprises are regarded as the backbone of every economy, greatly contributing to employment creation, innovation, and general economic development.

Small and medium-sized firms (SMEs) have been heavily impacted by economic shocks and uncertainty in the face of unprecedented difficulties.

The COVID-19 epidemic has highlighted the vital necessity for SMEs to seek funding in order to weather the storm and guarantee their long-term viability.  

Ghana, like many other developing nations, understands the need of assisting SMEs with tailored finance choices.

The funding options accessible to SMEs change as the economic situation changes.

SME finance in Ghana has developed to meet the different demands of small and medium-sized businesses, allowing them to survive even during difficult times. 

As the country strives for economic growth and development, it is critical to establish a supportive ecosystem for SMEs by providing a variety of funding choices.

SMEs in Ghana can handle volatility, create innovation, and contribute to the nation's development by knowing the available funding methods and picking the best solutions.  

This article covers strategy and financing options for SMEs during these difficult times.

Loans from banks

Bank loans, which give a lump sum payment for a predetermined duration plus interest, can help SMEs access finance.

Banks in Ghana provide specialized loans for SMEs, such as working capital loans, equipment financing, and trade finance.

Traditional banks provide a variety of loans suited to the specific needs of SMEs.

Term loans for long-term investments, working capital loans for day-to-day operations, equipment financing, and commercial real estate loans are examples of these.

Consider the loan's purpose and select the type that best fits your company's objectives.  It is critical to understand the loan application procedure.

Begin by compiling all essential papers, such as financial records, tax returns, company plans, and collateral data.

Complete the application with care, paying close attention to correctness and thoroughness.  

Banks frequently request collateral to obtain a loan. Real estate, equipment, and inventory are examples of collateral. 

Private equity and venture capital

Venture capital invests in early-stage or growth-stage businesses with great growth potential.

Private equity, on the other hand, often targets established enterprises looking for financing for expansion, restructuring, or turnaround. SMEs with great growth potential can attract venture capital and private equity investment.

These investors contribute financing in return for equity ownership, allowing SMEs to build up and enter new markets.  

SMEs seeking VC or PE finance should connect their company objectives with the interests of the investors.  

Investors may be drawn in by a scalable company plan, a competitive advantage, and great market potential.  

When pursuing VC or PE funding, a well-defined business strategy is essential.

Outline your growth strategy, target market, revenue predictions, and future plans for expansion.

Show how the investment will help to increase growth and produce profits. 

Angel investors

Angel investors are wealthy individuals who offer financing to startups and small businesses in exchange for stock or convertible debt.

They frequently contribute to the firms they invest in not just financial resources, but also industry experience, networks, and mentorship.  

Individuals who spend their own money in early-stage firms are known as angel investors.

They provide not just cash assistance, but also guidance and industry knowledge.  

SMEs seeking angel financing should create a succinct and convincing pitch that emphasizes their company's uniqueness, the problem they're solving, the market opportunity, and their development potential.

A well-crafted proposal may pique the curiosity and attention of angel investors.  

Angel investors are drawn to companies that have a clear market need and significant development potential. 

Government initiatives

The activities of the Ghanaian government are critical in providing an enabling climate for SME finance and growth.

By participating in these initiatives, Ghanaian SMEs can have access to critical funding, assistance, and resources that contribute to their success and the country's general economic growth.

The Ghanaian government has implemented a number of programs to assist SMEs, including the Ghana Enterprise Agency (GEA), Microfinance and Small Loans Centre (MASLOC), Ghana EXIM Bank, National Entrepreneurship, and Innovation Plan (NEIP), Youth Entrepreneurship Support (YES) Initiative, Agricultural Development Bank (ADB), Ghana Venture Capital Trust Fund (GVCTF), Tax Incentives and Support, all of which provide financial assistance, training, and capacity-building opportunities.

Asset financing and leasing

Leasing and asset finance provide an alternate avenue for SMEs to acquire important assets such as machinery and equipment, cars, and technology.

Unlike typical loans, which transfer ownership upon repayment, leasing allows firms to utilize an item for a predetermined length of time while making monthly payments. item finance, on the other hand, entails securing cash, particularly for the acquisition of a certain item.

Leasing firms finance the purchase of equipment, machinery, and other assets required for corporate operations.  

Leasing enables them to update assets at the conclusion of lease agreements, ensuring they always have cutting-edge tools available.

Debt restructuring

Debt restructuring is a financial approach that aims to change the conditions of current debt arrangements in order to make them more manageable for the borrower.

This proactive strategy enables SMEs to deal with cash flow concerns, decrease financial stress, and prevent defaulting on their obligations.

Debt restructuring might include modifying interest rates, extending repayment terms, or even lowering the principal amount owing.

If an SME is already in debt, participating in debt restructuring talks with lenders may provide some relief during difficult times.

Extending loan repayment durations, changing interest rates, and seeking temporary payment relief may all be included.

The writer is a Lecturer/SME Industry Coach University of Professional Studies Accra
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