Non-bank financiers provide vital lifeline to SMEs

Specialist non-bank trade financiers are fulfilling a crucial role in providing necessary working capital finance to internationally trading SMEs, but it’s a channel that is not being utilised to its full potential. That’s the view of Menso Kwint of Lombard Trade Finance who believes SMEs should be tuning into the benefits offered by companies like Lombard Trade Finance which is specifically geared to understand stock finance and smaller business and so provide funds to these SMEs. “With the proliferation of trade, the means of finance needs to develop to adequately support the transactions taking place. However, in recent times, it seems a ‘trade finance gap’ has come about through the inability or unwillingness of financial providers to loan sufficient funds to meet market demand,” says Kwint. “Banks in particular have become more conservative and focused more on lending monies to larger businesses post the recent worldwide economic recession.” In South Africa, SMEs in particular have struggled more than larger companies to obtain bank finance, says Kwint, and often the primary reason for their failure is financial constraint. “South Africa has a relatively well established financial services sector when compared to similar sized economies and even the rest of the world. However, certain financial constraints have skewed the allocation of credit towards bigger business and away from SMEs because of their lack of collateral and limited history and business information. Trade finance provided by non-bank financial service providers may be a crucial alternative, although there is a downside. “Finance is generally more expensive than traditional bank funding due to the trade financier borrowing the money it lends out from bank channels in the first place. However, if the importer has sufficiently high margins, the cost of the finance is negligible and it creates an opportunity to increase the scale of one’s operations.” INSERT ‘In South Africa, SMEs in particular have struggled more than larger companies.’ CAPTION Menso Kwint ... geared to understand stock finance and smaller business.