This article was first published on Stories by Populous World on Medium
Understanding SME Financing Needs
Small and medium-sized enterprises (SME’s) have always remained the engine for economic growth and development. More than 50% of Employment in 48 out of 76 countries is due to SME’s.
According to a survey by the Federation of Small Businesses, annual SME turnover is about £2trn, or 52% of the total of the private sector, so this level of growth, even if not completely realised, makes a huge contribution to the UK economy.
Small and medium enterprises are the heart of any economy. Small and mature firms maintain the highest level of overall employment, while smaller and younger firms are the richest in new job creation. However, despite their importance, SME’s are faced with many barriers to accessing funding from traditional sources. These barriers, therefore, limit SME’s resources and their ability to perform day-to-day operations smoothly, not to mention their plans to grow becomes a struggle.
With funding in place, businesses are in a much better position to take up new opportunities, develop innovative products or services and they’ll be able to fuel growth.
The Working Capital Cycle
Business-to-business sales consumes your cash flow. On one hand it is a positive place to be, sales mean money, on the other hand, when you are selling to another business, the accounts receivable process is not always smooth. You deliver the goods or services along with an invoice, and the customer pays the invoice later, but you could be waiting for up to 60–90 days.
The hitch is that businesses are good, repeat customers, so you can’t send the debt to a collections agency because you risk losing the good working relationship you have with them, ultimately losing them as a customer. So you wait for them to pay you.
When you sell something to a distributor that sells it to a retailer, ...
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