When it comes to the economic growth of our country, SMEs play an important role in it. Hence, these businesses must be taken care of by their finances. SMEs also play an important role in being one of the most loyal customers of the banking sector. Even though they are important, SMEs get loans with great difficulty. A bank should be able to find innovative ways in which it can lend SMEs.
Build Relationship with SMEs Early
SMEs feel comfortable and usually stick with the banks they already have an account with. As their business grows, they try to move to another bank which can create a problem. Banks should try to build relationships with these companies as early as possible. It is easier for the banks to keep a track of their credit rating, the target audience, the number of employees, etc. This also helps the bank to cater to certain areas in which the SMEs are focusing on.
Rework on the Credibility of the Borrower
The banks usually focus on the credit rating of the borrower based on which the loan is sanctioned. However, to make it easier for both banks and SMEs, the banks should hire analysts who can review the skills along with the credibility of the borrower. If the borrower has very good skills, then the loan can be sanctioned based on certain criteria.
Provide Support and Financial Advice
In the initial stages of investing and building up the business, the SME sector people need guidance and support to ensure that their business gets profit. A bank can help the SMEs by supporting them and offering financial advice apart from funding. This can also be combined with additional offers to enable SMEs to become more digitalized and improve their businesses.
Provide Funds for Digitization
Banks can help SMEs to become more digital by funding their business and offering them services that would help them to grow digitally. They can also help them in funding the design and implementation aspect of their digital platform. Digitalization can help both SMEs and banks to gain more profit and popularity. This could also help them in securing a place in the market and have a virtual presence.
Banks should Encourage Automation
Automated systems are very effective and convenient and hence, banks should encourage SMEs to use automation as part of their daily work. This would help the SMEs to keep a track of their finances and also help the banks to ensure that the instalments are being paid on time.
Many articles can be found on the internet that talk in detail about the innovative ways of SME lending. However, you can get in-depth analysis and views of Eyal Nachum for better understanding.