BUSINESS

Expert: SMEs challenges beyond access to finance

Published

7 years ago

September 21, 2017

Zacheaus Somorin

Contrary to access to finance that most entrepreneurs identified as the major challenges facing the development and contributions of the Micro, Small and Medium Enterprises (MSMEs) to the Gross Domestic Product (GDP), finance expert has said that small business owners challenges are numerous and beyond just access to fund.

Speaking on the sideline of an SME clinic organised by Prinsult Consult Limited in Lagos recently, a Deputy Manager at First Bank Limited, Mr. Femi Odunubonu, said that challenges of SME’s are quite many, they complain of not having access to finance and when they do they also complain of high interest rate and other issues that has to do with documentation, collateral and others. But basically I think the challenges are beyond the finance.

Mr. Odunubonu, who is also the team leader of Oil and Gas segment of the bank, explained that the challenges are more to do with not understanding the entire business itself, before going into such business. For instance, he mentioned the model canvas, which simply means understanding the building blocks of every business you are going into. From the suppliers, the key customers, the revenue strange, the cost structure, the key relationship and all others.

According to him, “if you do understand that, it becomes easier to know, for instance, where is the money for this business? How am I going to manage my cost? What am I adding differently? What’s my Unique Selling Point (USP)? My areas of differentiation, because the market is there, different sector whether, it is telecoms, or in agric, or its in general commerce or its in infrastructures and all others.”

He stressed that there are so many business areas, but what to do differently by the SMEs, so as to ensure that values are added to the market segment they wanted to play into.

“Lots of SME’s that I see just want to appeal to the mass market without any thinking of differentiation and that’s why they become part of the business that dies. Statistics show that virtually those SME’s 90 per cent of them fail in the next five to ten years, why? Because so many issues that has to do with business is not properly understood.

“You probably have a hubby who understands the segment of the business but what about the finance part? What about the strategy of your business? What about the leadership skills? What about the human capital development, a whole range of issues that an SME needs to understand.”

He, however, noted that SMEs need constant training, because I believe that, absolutely 100 per cent of the world entrepreneurs, SME’s, large business owners are identifying needs and are trying to proffer solution to those needs. While commenting on what the lender has done in supporting the SMEs, Odunubonu, said: “Without blowing our trumpet, we have done a lot in the SMEs space. And beyond even doing so much, in terms of financing and giving financial advisory services, we even go to extend of organising SME’s conferences that we hold periodically to bring SME’s on board and explain to them what they need to know to succeed in their businesses.”

He, therefore, advised SMEs who are seeking loans in the commercial banks to first learn about the business they wanted to go into, know the sector because every entrepreneurs experiences his or her on own pit fall, but there are general things that they need to just know in business, which is very important to learnt.

“Also, needs to understand the market you want to enter into, who are the major competitors in that business, where you are rank in that business, what you are going to do, are you going to be competing against the big guyz or you want to craft a nitch for yourself, where you want to play, you need to understand all of these.

“Once, you understand all of these, I would advise that as a prove of contest, start with something small of your own maybe your personal saving and all that once you generated some revenue for the business, you can then come for expansion of capital, to expand to the next level, you then think of investors to come and invest in your business, because sometimes not the money that is very important because you might have the money and not have what it takes to run the business”, he explained.