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SME's - whose responsibility is finance for SMEs?
| Guest post by: Dr. Rob Smorfitt |
Article Overview: Is it the role of government to fund SME's?
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Free Download - SMEs – SMEs struggling in South Africa. Why? By Dr. Rob Smorfitt |
SME's - whose responsibility is finance for SMEs?
Another blog laid the blame for SME failure at the door of finance, stating that a lack of finance was a cause of business failure.
I believe that as entrepreneurs we must accept that a lack of finance is a failure on the part of the entrepreneur.
The first point is that most SME's I see, believe that government has a duty to finance their businesses. They believe it is their right to be funded. I cannot disagree with this attitude more than I do. Entrepreneurs usually start small and grow quickly into something big. These people believe that government should fund a large business from day one. Everyone wants to start as the owner of a large business with lots of staff so that the owner can sit and do nothing. I have seen people offered excellent businesses that are on the market, netting 150 000 per month, and they are not interested. The banks would finance this without blinking, but these people still want government to fund something bigger. And these are people with no business experience at all. This is never going to work. As an example, government released information about a project that they did to create new businesses. The number that were still in existence after 1 year, out of 1700+ was ZERO. Yes, ZERO. The model of government seeking wannabe entrepreneurs and just giving them money will never work. It will instead become a hotbed for conmen seeking easy money.
The second point refers to a common error I see in South Africa is the process of planning. Everyone does the costs first, and then juggle sales to exceed costs and show a profit. Everyone is going to make massive profits from day one. Not likely. It is simply a lack of foresight.
Entrepreneurs in South Africa need to accept that financial failure in business is their own fault, and they need to check and see what they have done wrong!
Rob Smorfitt
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Article Tags: entrepreneur, entrepreneurship, finance, SME, SME development, SMME, Smorfitt, South Africa
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About the Author: Dr. Rob Smorfitt RSS for Dr. Rob's articles - Visit Dr. Rob's website Have an MBA and a PhD in entrepreneurship. Three key areas of ongoing research are entrepreneurship and innovation in large business strategy, the impact of legislation on SME development and SME finance. Run my own SME blog at http://sme-smb-smme.blogspot.com as well as an entrepreneurship and innovation for large businesses blog at http://innoveur.blogspot.com I have been self-employed since 1982. I have started or purchased in excess of 50 businesses since then. Most were sold again and a few were shut down because of a lack of profitability. Many were run by staff or family while I worked full time in my bigger businesses. Author of 6 books. Written articles for various magazines, newspapers and websites. Experienced in research within developing countries.
Click here to visit Dr. Rob's website  
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Related Forum Posts
Re: In-House or Outsource?
- Unfortunately, in the South African context, very few SMEs see outsourcing as an option. They believe it is too expensive, and they are paranoid that someone will "steal their ideas".
I believe that the three main functions that cannot be outsourced are marketing, sales and strategy. These must be done in house I believe. If you do not have the marketing skills then get them. Hire a consultant or attend a course, but get the skills. Even if you use a consultant, you need to understand what marketing is about, as no one knows your market like you do. Marketing is made to seem difficult and complex, but everyone who really understands their markets, can easily learn to do their own marketing.
In South Africa, labour legislation is extremely inflexibile, and consequently labour broking is a large industry. This is an ideal starting point for SMEs in South Africa, as it is a legally complex area, whih comes with severe penalties.
I say do it!
Rob Smorfitt
Finance is the basic requirement
- Without finance no one is going to stand next to you, your employees join your company looking at your financial situation and growth, if you don't have enough finance then better do a job.
Re: Women and Financing - It's Difficult!
- I found this paragraph of interest (in the article from Nana's link:
[quote="Nana":3r7womqv]Other studies show that women operate more service and retail establishments than men, which might explain their difficulty in getting financing since financial institutions often consider these two sectors more risky. However, although women are generally less inclined than men to apply for financing, when they do, they are more likely to get it. According to a study by Industry Canada on SME financing in Canada, in 2000 majority female-owned SMEs obtained a loan approval rate of 82%, which is slightly higher than the approval rate for majority male-owned businesses (80%). This suggests that when they do apply for financing, businesswomen submit excellent applications. [/quote:3r7womqv]
They say, "Women are more likely to get [financing]."
But the difference is only 2 percentage points! Big deal! And, that was only for one year, 2000. I'd like to know what the 10-year average is.
Numbers can be manipulated to mean anything you want them to mean...it all depends on what you want to show.
How to get financed
- Hi,
Great forum. A lot of information! My question is this, is there a company out there that will finance a conversion on an older truck. My situation is this, I have already purchased an older international tractor/truck and have finished stretching it already. I now would like someone to do a motor coach conversion(shell only)and I will finish the interior to my satisfaction. Most finance companies don't want to hear older truck! Thank you in advance for info you can provide!
Proper planning to get investors
- Investment is very easy to get once you have the complete idea show it to the local finance company, they can get you investors with a basic fee, since they know your business and status etc, also local presence of finance firm will help investors feel easy to check on growth of you business.
It will be difficult to get direct investors for your business without proper planning and reports.
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