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How SMEs can access capital
Women and youth-led SMEs in particular, have to deal with several barriers that cause many of them to abandon their entrepreneurship dreams. PHOTO / FILE
What you need to know:
- To support the education sector, many banks will offer products such as unsecured temporary overdrafts at the start of new school terms.
Small and Medium Enterprises (SMEs) in Uganda are undercapitalised, lack of access to financing and markets, in addition to stringent policies that all work together to stall their growth.
But financial Institutions can support SMEs to realise their short and long-term growth targets. Financing options from Banks are able to bridge the gap between SME owners and their goals by offering tailor made financing solutions.
For Financial Institutions, supporting SMEs to achieve success is of strategic importance because they are a key engine to Uganda’s economic growth, contributing approximately 80 percent of the manufactured output, 20 percent to Uganda’s Gross Domestic Product (GDP) and employ more than 2,000,000 people in Uganda. Practically, SMEs can take advantage of the following offerings from banks to drive the growth of their businesses:
Financing options with incentives
The cost of credit is prohibitive for many SMEs and yet they need credit facilities to manage costs and also upscale their businesses.
When looking at options for financing such as business loans, SMEs should look out for Banks that offer incentives such as reduced or waived arrangement fees. These incentives lower the cost of borrowing and make the repayment of loans less cumbersome.
Additionally, take the time to understand how your business performance can help you acquire the most optimal credit facilities. For instance, banks can provide loans that are tiered according to business turnover – and meeting this threshold will ease the process of acquisition of credit facilities for your SME.
Product segmentation
Many SMEs are owned by groups that are traditionally marginalised and face more challenges while operating their businesses. Women and youth-led SMEs in particular, have to deal with several barriers that cause many of them to abandon their entrepreneurship dreams. While identifying financial partners, these special groups should look out for organisations that have created specific products for each of their customer segments.
Segmentation of products and services allows unique customer needs to be met, something generalised products are not able to achieve.
As an SME, identifying a financial partner who contributes to the levelling of the business landscape and thus, offers you fair competition, is important in navigating systemic hurdles.
Utilise sectoral support
SMEs operate across a myriad of sectors including, trade and services, agriculture, education, health, real estate, transport, manufacturing, hotels, leisure & hospitality, and many more. SME owners must identify and take advantage of seasonal and sectoral-based offers such as reduced lending rates, which allow them to make a saving in the cost of running their businesses.
Mr Robert Wanok, the head of personal and business banking at dfcu Bank.
To support the education sector, many banks will offer products such as unsecured temporary overdrafts at the start of new school terms. These offers allow school owners to afford the necessities required early in the academic term, making it easy to manage costs such as payment of salaries, utility bills and much more.
Offerings on asset financing are important to players in the agricultural sector and agro-processing businesses, and business owners can make use of them to make investment into assets and charging acquire working capital finance.
This sector-based support allows SMEs to receive specialised financing because these offers have been packaged to meet the needs of each segment at each stage of its value chain.
The writer, Robert Wanok is head of personal and business banking at dfcu Bank.
