Debt Finance for SMEs
Training
Inhouse
Description
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Type
Training
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Methodology
Inhouse
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Duration
1 Day
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Start date
Different dates available
This course is only available in-house and can be delivered to a team of people at a venue of your choice.
For more information about this course, trainer or to request a quote, please contact us on: enquiries@redcliffetraining.co.uk
Facilities
Location
Start date
Start date
Reviews
Subjects
- Debt finance
- Corporate Finance
Teachers and trainers (1)
Former Practitioner
Former Practitioner
Course programme
Course Overview:
SME’s are a challenging sector for banks especially in the present climate and usually fall outside the radar of most corporate finance specialists.
These businesses are usually undercapitalised, lack security, have a limited track record and are normally heavily reliant on external providers for working capital. A major criticism of the banking sector globally is that banks have all but closed their lending books to this sector despite protestations to the contrary.
This course considers the risks, challenges and difficulties encountered in dealing with the SME’s and tries to persuade delegates that it is not quite the terrifyingly risky sector that at first glance it seems to be.
Learning Objectives
Explain the importance, structure and composition of this sector to corporate finance professionals by:
- Defining the basic rules and how to communicate and deal effectively in lending to small and medium enterprises
- Listing the different principles for financing small and medium enterprise
- Assessing SME creditworthiness
- Applying funding mechanisms for small and medium enterprises
- Identifying risks associated with lending small and medium enterprises
- The use of non-financial analysis to consider the future prospects of an SME business
- The identification of factors which will be critical to success.
Knowledge Pre-requisites
This course assumes at least a basic understanding of banking lending, including financial and non-financial analysis.
Course Content:
Introduction – What is an SME and What are the Challenges?
- Definition
- Shortage of capital and liquidity
- Shortage of skilled manpower
- Quality control problems
- Lack of entrepreneurial expertise
- Shortage / irregular availability of financing facilities and/or equity sources
- Inability to meet credit criteria / credit conditions
- Inadequate bargaining skills / options
- Lengthy documentation procedure
- Helping the SME to succeed
Case Study/Exercise
Understanding the SME Business Model
- Resources and capabilities
- Sources of competitive advantage
- Value chain analysis
- Economy, Objectives, Strategy, Tactics – Most
- Adding value
- The option to sell
Case Study/Exercise
Why Do Banks Lend to SME’s
- Diversification of the loan portfolio
- Boosting the industrialization process
- Reducing unemployment
- Growth of the export sector
- Improving the balance of payment situation
- Low loan loss ratio on SME bank deposits / banking services
Case Study/Exercise
How Do They Lend
- Overdrafts, loans and term loans
- Asset Finance
- Leasing
- Trade finance
- Guarantees & Indemnities
- Sole Traders
- Partnerships
- Limited Companies
- Stakeholder guarantees almost mandatory
- Risk Appetite in practice
Case Study/Exercise
Preferred Sectors for SME Financing
- Export oriented goods and services establishments.
- Largely using indigenous technology and resources.
- Choices of sub-sectors within each industry.
- Up stream/ down stream
- Serving to medium / larger
- Cottage / heritage industry.
Case Study/Exercise
Financial Evaluation of the SME
- Is there a plan
- Importance of financial Statements
- Balance Sheets
- Profit and Loss Accounts
- Cash flow Forecasts-Assumptions and Sensitivities
- Off balance Sheet Assets
- Risk and Mitigants
- Project Appraisal – NPV, Payback
Case Study/Exercise
Financing Considerations
- Assessing the quality of SME financing proposals
- Quality of ownership of prospective borrowing entities
- Key financial ratios, market competition, size, scope & potential of product line
- Security collateral coverage, importance of personal guarantees
- Lending guidelines, prudential regulations
Case Study/Exercise
Ratio Analysis For SME’s
- Minimum requirements
- Importance of Financial Analysis
- Trend Analysis
- Key Performance Indicators
- Financial Strength
- Liquidity
- Serviceability
- Working Capital Management & Asset Performance
Case Study/Exercise
Non Financial Analysis of the SME Business Plan
- The need for both Financial and non-financial analysis
- Real Business issues for SME’s
- Value Stream for SME’s
- Identification of critical success Factors
- Identification of Key Performance Indicators
- Credibility of Business Plans
- Credibility of Management
Case Study/Exercise
SME – Lending Challenges
- Relatively informal structure and organization of SMEs
- General lack of financial and managerial expertise
- Poor record keeping and planning on the part of their owners
- Danger / problem signs / signals,
- Problem solving / trouble shooting
- Cautions & protections
Case Study/Exercise
The Role of Specialised Institutions
- Government Agencies
- International Agencies
- Provincial And/or Regional development agencies
- Subsidies
- Support programmes including guarantees
- NGO’s
Case Study/Exercise
Why Bother?
- The importance of SMES
- SME numbers
- The Future
- Picking today’s winners
- Economic & Strategic Considerations
Case Study/Exercise
Debt Finance for SMEs