Women operating Small and Medium-scale Enterprises (SME) have been encouraged to exploit other funding opportunities available to them to help improve their cash flows before heading to the bank for loans.
At an African Globalized Investment Forum held for women in trade under the auspices of Women for Africa Network in Accra, Patricia Sappor, President of Chartered Institute of Bankers (CIB) said SMEs can take advantage of the relationship they have with their suppliers to get good on credit, rather than go for loan to buy such goods.
“Another encouragement is the supplier credit; so instead of borrowing from the bank to pay the supplier upfront, why don’t you get the supplier to give you room to sell the goods before you pay the supplier.
You need to get your buyers to pay you a certain percentage of what they intend to buy upfront so that you increase or improve on your cash flow. So you are getting some leverage from your supplier and also getting a leverage from your buyers; this will also increase your cash flows,” she said.
Ms. Sappor added that another option is the use of crowd funding. “This is where you get a lot of people coming together in a pool to fund you without paying much interest as you should pay.”
She, however, advised that even if startups would want to go for bank loans, they should be certain of their financial status first as the cost of such sources of funding are high. “Getting finance from the bank is important but, first of all, as entrepreneurs, we need to find out whether we really need those facilities, because at the end of the day, you are also going to pay interest and this interest will also erode part of your profit,” she said.
Meanwhile, Head of SME Banking at Absa Bank Ghana, Audrey Abaka, educated the SMEs on what is required of them before they are able to access loans from banks. “When it comes to startups in assessing credit, there are a couple of things that we look at. One key component is capacity to borrow and capacity to pay.
Most startups haven’t gotten to an established level of business where they are able to generate the right revenues consistently to be able to finance the debt. What we do is rather to focus on their technical capability building, mentor them, give them business development support among others,” she said.
Ms. Abakah added that Absa Bank offers women entrepreneurs some discount on loans to reduce the cost of financing it. This, she said, is the bank’s initiative to support women entrepreneurs. “If you are a woman…we give you discounts so that you can be encouraged borrow,” she said.