Bank Funding Alternative for Small Businesses
When you think to start a small project and need financing, the first idea that comes to your mind is to go to the bank, but the truth is that there are many alternatives available to finance your project through companies specialized in non-bank financing, But the problem is that many small business owners do not know much about it.
Financial leasing, factoring, investment funds in small enterprises and venture capital companies, are other non-bank financing methods available to small and medium enterprises.
Small and medium enterprises are very important in providing job opportunities and combating unemployment, but we always talk about banks only to finance these projects, despite the presence of many non-banking agencies that can provide the necessary financing, through various financial tools.
The past four years witnessed a major boom in the field of companies operating in finance from outside the banking sector, and some companies operating in venture capital.
Among the financing mechanisms different from banks is the activity of factoring, where the company carries out the activity of factoring, which means the possibility of lending companies the value of their bills of sale of products, and what determines the nature of the approval of granting the loan or not is not the financial position of the seller the “borrowing company” but the ability of the buyer of the goods to pay.
If this is available, the loan is provided, which facilitates work for small and medium companies that export as well as operate in the local market.
The company provides protection for exporters from political and economic risks in cases of export, especially to areas where the risk is high, such as the African market or areas of conflict, The company’s work is limited to providing protection for companies whose export is limited to open accounts and not documentary credits, because banks provide the required protection in this case.
Among the non-bank financing methods, is financial leasing, He explained this system, which depends on the presence of the lessor “the financial leasing company” and the lessee of the “client or factory.” The leasing company enters into the purchase of machinery and equipment for the customer and pays their value in order to be the owner of these assets until the customer or factory pays the rent, and he has the right at the end of the period to obtain this asset. machines” at a nominal value
It is a fast system in project financing and popular with many of them, and it has become available to small and medium companies through companies specialized in financing small and medium projects, but it is required that these companies be financially disciplined and have an auditor approved by the Central Bank to ensure their ability to borrow and repay.
Investment funds in small and medium enterprises are one of the most important non-banking means of financing, Where the investment fund finances the small or medium project and completely restructures it to turn it into profitability through the administrative reforms carried out by the fund.
There are so-called restructuring funds that operate in many countries of the world, and their mission is to rescue faltering projects, There are many exit methods after the end of the state of stumbling, including the Nile Stock Exchange, or for the investor to buy back his shares, which is the case preferred by most of the troubled companies, or the merger of the factory into a large factory that provides him with an intermediate industry.
In order for the company to accept entry to rescue the faltering projects, it is required that they be industrial, and the factory has a product that is required in the market, has good management, and there was no erosion in its capital, and this stumbling did not last for long periods. The company gives priority to troubled labor-intensive factories.
