Post on 05-Apr-2018
7/31/2019 Options for SME Funding 2012
1/23
Vanessa Adams, DirectorUSAID West Africa Trade Hub
May 9, 2012
7/31/2019 Options for SME Funding 2012
2/23
Business Plans
Investment Promotion
Financial Structuring
Negotiations
ManagementCoaching
Product costing andPricing
7/31/2019 Options for SME Funding 2012
3/23
Case Study: Nigeria Cashew Cluster FinancingScheme
7/31/2019 Options for SME Funding 2012
4/23
SHORT TERMFINANCING
Funding needed to cover thecosts of the purchase or
production, packaging, andforwarding of finishedproducts for delivery to
clients.
MID AND LONG TERM
FINANCING
Funding needed to supportthe export trade business
such as buildings andequipment.TIED TO
ORDERS
TIED TOBUSINESS
STRATEGY
7/31/2019 Options for SME Funding 2012
5/23
BASIC EXPORT TRADE FINANCEPRODUCTS
Lettersand Linesof credit
Advances
Loans
7/31/2019 Options for SME Funding 2012
6/23
Advances - funds orservices extended bybuyers or pre-exportsuppliers in advance of
delivery
Loans - a sum of menythat is given by one partyto another for a limitedamount of time. It is to berepaid according to termsof the loan agreement
which includes any interestto be charged and atimeframe for repayment.
Example clientadvance to acquireraw materials for
processing
Example commercial loanto acquire and install
processing equipment
7/31/2019 Options for SME Funding 2012
7/23
A letter of credit is a document issued by a bank that acts as aguarantee of payment to a beneficiary.
LETTER OF CREDIT
If the party (yourpurchaser or you as
it pertains to yourpre-export suppliers)do not perform theirobligations, the bank
pays.
Source of repaymentof the transactionmeaning that the
exporter will get paidwith the redemptionof the letter of credit
7/31/2019 Options for SME Funding 2012
8/23
Revocable letter of creditLC can be revoked by the issuing bank without the agreement of the beneficiary.
Irrevocable letter of credit
Cannot be cancelled or amended without all the parties agreement.
Standby letter of credit
Guarantee of payment. If the beneficiary does not get paid by its customer, itcan then demand payment from the bank by forwarding a copy of the invoicethat was not paid and supporting documentation.
Revolving letter of credit
It is established when there are regular shipments of the same commoditybetween supplier and customer. Eliminates the need to issue an LC for eachindividual transaction.
7/31/2019 Options for SME Funding 2012
9/23
Lump sum of money
Repayment by installments over a definedperiod of time (capital + interest)Loan
Maximum amount of money available
Can be used as needed
Repayment is flexible (capital + interest)
Capital reimbursed becomes available foruse
Line of
credit
LOANS ANDLINES OF
CREDIT AREDIFFERENT!
7/31/2019 Options for SME Funding 2012
10/23
Traditional Channels
Customers
Commercial banks
Development banks Specialized public
services
Equity partners
Other Channels
Savings and loancooperatives andassociations
Microcredit organizationstransitioning to savingsand loan organizations
Personal and/or
professional contacts andacquaintances
7/31/2019 Options for SME Funding 2012
11/23
Buyers and pre-export
suppliers needs assurancesbefore they will advance fundson purchasing or supplyTRUST, CAPACITY andTRACK RECORD are keys toaccess
Banks and other financialinstitutions require hard and
soft guarantees of recoveryTRUST, CAPACITY, TRACKRECORD AND thepossession ofGUARANTEEABLE propertyand/or contracts are keys to
access
7/31/2019 Options for SME Funding 2012
12/23
TRUST
TRACKRECORD
CAPACITY
HARD ANDSOFTGUARANTEES
7/31/2019 Options for SME Funding 2012
13/23
Work with and throughrecognized industry channelsand operators more dealsare made on referral than anyother way!
Work with financial institutionsthat know your industry, yoursuppliers and purchasers. If theydont know your sector, they willnot be motivated to finance yourexport activity!
Get in the financial servicesloop transactional historybuilds trust, the lack of such
is detrimental to access tofinancial services.
Use financial instituitonsthat have guarantee and/orspecial lending programs foryour industry, SME/SMI.
7/31/2019 Options for SME Funding 2012
14/23
Transparency and goodgovernance are key! Sharingyour strengths and weaknesseswith your partners will enableyou to work together to make adeal and to subsequently get itfinanced.
Submitting clear, credibleapplications for financing,including professionalbusiness plans, is animportant step in provingyour capacity to pay backfinancing.
Reinvesting in your business willenable you to grow capacity forbigger and better deals. If financialservicdes organizations see that youinvest in your business, they will bemore inclined to believe in yourprospects!
Opening your capital topartners with capacity youhave not yet build is a meansof acceleriating your access togood deals and necessaryfinancing.
7/31/2019 Options for SME Funding 2012
15/23
Start ups need not apply is very
prevalent.
Until you have a track record,you may have to depend onadvances and informal lendingchannels.Be sure to document your
successes!
Build a financial services history financial institutions makedecisions on transaction
histories and subsequentrecovery perspective!
Building Track Record
7/31/2019 Options for SME Funding 2012
16/23
Prevailing regulationsrequire hard guarantees upto and often exceeding 100%for commercial lending.The most recognized hard
guarantee is titled property.
Negotiating contract securitywith your purchasers is a way
to access pre-export lettersand lines of credit.
Domiciling receivables is arecognized soft guarantee for
the vast majority of financialinstitutions.
Tapping into developmentguarantees available throughspecialized public services is away of attaining guaranteecriteria.
7/31/2019 Options for SME Funding 2012
17/23
Applicationletter (or
form)including
specificproduct and
rate youwould like to
see applied
Synopsis ofthe businessplan specific
to theapplication
Documentati
on provingsoft and hard
guarantees youare bringing to
the table
BusinessPlan specific
to theapplication
PROMISINGAPPLICATION
FORFINANCING
7/31/2019 Options for SME Funding 2012
18/23
Background, experience and market
Projected sales for the fianancing period
Conditions of sale
Financing needs for the period
Projected financial results
Practical measures for re-payement of the financing
Annexes Sales contracts and letters of intent, Guarantees
7/31/2019 Options for SME Funding 2012
19/23
Background Legal Status
Capital and partnership
Management and technical team
Financial condition
Description of the activities of the business History of activities implemented and principal clients
Presentationof the
Business
Presentation of the products and services of the business
Source and means of supply of raw material and other components ofthe products and services of the business or of finished material forresale
Local and export markets
Market share and positioning
Sales policy and ways and means (price, marketing, distribution,etc.) Competition Strengths and weaknesses compared to competitors
Products and
Services
7/31/2019 Options for SME Funding 2012
20/23
Human resources
Technical resourcesInfrastructure and equipment
Financial resourcesTechnological resources
Other existing resources
ExistingResources
Product and service vision over the next five years
Expected results in terms of market share and positioning
Additional resources necessary to attain the vision (human, technical, infraand equipment, financial, technological, other)
Short, mid andlong term projects
Profit and loss over the next five years Five year projected financial planExpected results
7/31/2019 Options for SME Funding 2012
21/23
Examples of Alternative FinancingInstitutions
EDIF
Databank
Serengetti Capital
Root Capital
Grassroots Business Fund
Acumen Fund
Oicocredit
I&P Consult
ResponsAbility Others
7/31/2019 Options for SME Funding 2012
22/23
More about the USAID West Africa Trade Hub projectatwww.watradehub.com
Subscribe to the USAID Trade Hub monthlynewsletter, Tradewinds. Email info@watradehub.comor enter your email address on the website!
Join the West Africa Trade Hub A2F blog atwww.watradehub.com
http://www.watradehub.com/mailto:info@watradehub.comhttp://www.watradehub.com/http://www.watradehub.com/mailto:info@watradehub.comhttp://www.watradehub.com/7/31/2019 Options for SME Funding 2012
23/23
Borderless Alliance Secretariat
USAID West Africa Trade Hub
Accra, Ghana
www.borderlesswa.com
www.facebook.com/borderlesswa
http://www.borderlesswa.com/http://www.facebook.com/borderlesswahttp://www.facebook.com/borderlesswahttp://www.borderlesswa.com/