Do not be afraid to take loans – experts urge small businesses

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By: Amar Persaud

Recognising that access to capital is a major challenge in the start-up and early operations of small businesses, experts have advised these categories of entrepreneurs to not be afraid to take loans, noting that there are several options available locally.

However, before small businesses decide to apply for a loan, they critically assess their operations to determine the exact uses of the finances and will it will impact the success of the venture.

These points were highlighted by Felecia Boyle-Bazard, a representative of Executive Business Solutions Guyana Inc. who was participating in a panel discussion that was organised as part of the Georgetown Chamber of Commerce & Industry’s (GCCI) National Small Business Week.

During the discussion, it was pointed out that in order for small businesses to even be considered for a loan at a commercial bank, a number of documents and paperwork are needed to be submitted – a tedious and bureaucratic process.

“Yes, I feel you and I hear that it takes a lot to get all these paperwork…But even before that you figure that you want a loan, figure out where you stand as a company, what you are going to do with this loan, how it’s going to increase revenues for you…so I really encourage you to think about the bigger picture and where does your business stand,” she advised.

On the other hand, Eusi Evelyn, who represented Green State Oil and Gas Services, recognised that many small enterprises are afraid to take loans – an attitude, he insists, must be ridded.

“Don’t be afraid of loans…with good financial management, you are more likely to tap into bank loans that you can use to buy equipment, to support your business in the future,” he reasoned.

Outside of commercial banks, it was emphasised that through the Small Business Bureau (SBB), there are many financing options available to small businesses.

SBB’s Shamane Headley said these include investors, grants, loans and bootstrapping.

“…the small business development grants, we also have the small business development loans and the sponsorship. Generally, the sponsorship is available for persons who are interested in marketing or promoting their businesses and cannot access the grants or the loan at the time,” she explained.

“But in addition to that, the loans are always available through the SBB. Currently the grants available are within GY$200,000 and all these are available for all business sectors locally but we should let persons know that it is not accessible by public servants,” she added.

“However small business loans are available at the maximum of GY$30,000,000…it’s available to all business sectors and the benefits include 6% interest rate and a collateral guarantee between 40% to 70% from the Small Business Bureau. So, once you’re registered client of the SBB, you can choose either of these financial options through the SBB,” Headley emphasised.

A 2018 Inter-American Development Bank (IDB) Report had documented that most businesses in Guyana are small and medium sized (SME) and that they operate in a less than auspicious business climate, and their failure rate is high.

The IDB Report noted that two of the reasons that financial intermediaries are reluctant to grant credit to SMEs are the perceived higher risk of failure and lack of adequate collateral.

TIPS FOR FINANCIAL MANAGEMENT

Meanwhile, in sharing tips for financial management, Evelyn explained that small businesses should acquaint themselves with the concept of bookkeeping, making accurate projections, creating financial statements and accessing business financing.

He stated that poor financial management can lead to challenges in staying on top of bills, securing financing, managing a budget and controlling debt.

“Creating a budget is the first place to start with your financial management practice. A budget is list of all your monthly/ yearly expenses organised by categories…a cash flow projection is used to see if projected cash receipts will be sufficient to cover projected cash disbursement,” Evelyn advised.

He also explained that bookkeeping leads to better business decisions regarding financing, taxes, owners’ withdrawal, and retirement.

“It is also helps you to make decision on planning inventory and setting prices…also, determining whether you have sufficient cashflow to sustain operations…it will also help to provide to banks and investors with the financial reporting they need to loan money or invest in the business,” he added.

FINANCIAL SOFTWARE

In order to stay in the game, small businesses were also encouraged to see the benefits of investing in financial software.

This point was explained by Marlon George from Guyana Payroll Solutions Inc. who was another panelist.

He noted that utilising financial softwares is important because it enhances a business’ professional image, brings awareness of business performance, is efficient and responsive, and gives the ability to organise and plan.

“The developers continuously update these applications and so you benefit from enhanced security. They think about all the accounting in the backend and how these things should work,” George explained.

He advised that when selecting a financial software, businesses should research the reviews, sign up for demos, ask questions, and make sure the interface is easy to navigate.

CHANGE WITH THE TIMES

In December 2021, President Dr Irfaan Ali had challenged small and family-owned businesses to change their approach so that they can get a larger chunk of benefits during this transformation period.

“Yes, the family businesses are good. But times are changing, circumstances are changing. And if ten small businesses can come together and take away 35% or 30% share in that market, aren’t they better off? There is better competitive advantage… Sometimes, individually, we are satisfied with a small share… But it’s not about being satisfied with a small share, it is missing out on opportunities,” he stated.