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GUIDE LINES FOR APPROACHING LENDERS – III

The prerequisites for approaching a lender which every small and medium scale industry owner should know are discussed in this lecture.

Commercial Information

Details of orders booked: If you are requesting credit to enable you to fulfill a large or profitable new contract, it is advisable to have all the documents, correspondence, quotations from suppliers, draft contracts with buyers and suppliers, and your own costing, and calculations ready for discussion. This is all the more important if your order is for export. The credit facility you obtain from your bank will almost certainly need to tie in with the payment methods that you use with your suppliers or that are stipulated by your overseas buyers.

You are strongly advised not to sign any firm contract with suppliers or customers before you have discussed credit and payment methods with your bank. The reason is simple. Most import-export business arrangements or contracts stipulate the form of payment and the credit (delayed payment) terms the buyer or the seller offer or require. Once the contract is singed it may be too late to alter the terms and this may seriously limit the scope of the facilities your banker may be able to offer you.

Business Plan: If you have an up-to-date business plan for your company, showing intended capital investments and forecast revenue and expenditure for the coming three to five years, this is an excellent document to produce during discussions with your banker or financial adviser.

If, on the other hand, you do not have such a plan, you may find it useful to draw one up. It will be of great value to you personally, apart from anything else. It will also add to your credibility when you discuss your credit request with lenders. You should be able to prepare such a plan yourself, with the assistance of your qualified status is necessary. You may also ask an outside accountant or consultant to prepare the plan for you. The outline of a short, simple but effective business plan is shown in Box 7.

Read more: MGT601 - SME Management - Lecture Handout 22

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ISSUES AND POLICY DEVELOPMENT FOR SME – I

This lecture is concerned with the different issue and other obstacles faced by the policy makers while forming an SME policy for Pakistan. This includes both long term and short term issues.

Issues and Policy Development

Pakistan’s economy is an economy of SME. Policies in the past have given a general perspective, direction and defining broad parameters of activity within the macro environment framework, but efforts have focused on large enterprises, neglecting SME, which are at the heart of our economy. Our SME suffers from variety of weaknesses, which have constrained their ability to adjust to the economic liberalization measures introduced and to take full advantage of the rapidly expanding markets of the world. But SME importance and contribution in the economic activity suggests that there is a significant potential to enhance their growth through appropriate regulations and promotion.

While SME are mentioned in some of our socio-economic strategies and policy documents, measures are not specified and prioritized for us to be able to speak of any coherent SME policy or approach. The SME Sector Development Program seeks to improve the situation by inviting all concerned stakeholders to draft Pakistan’s future SME policy.

SME promotion is an important issue for many government departments and central offices. However, there is an existing lack of coordination and regular information exchange mechanism among institutions which constraints their ability to deliver in the SME development process. The responsibility for facilitating the SME policy development lies with SMEDA, attached to the Ministry of Industry and Production. One of the major reasons for the lack of coordination is that SMEDA has not been provided with a mechanism to initiate, coordinate, monitor and evaluate initiatives of SME development outside of its own scope of activities. Therefore, cross departmental and stakeholder consultations, resulting in the preparation of our national SME policy are our key to success. A network of institutions stimulating the growth of SME is also being proposed. The issues highlighted in this lecture give a retrospective view of things while giving a current picture of the SME business environment in Pakistan. There are issues we may only solve in the long term and which therefore are beyond our current scope. And there are issues we may solve in the short to medium term. These issues should become the focus of our SME policy. Short to medium term issues revolve around three major topics:

Read more: MGT601 - SME Management - Lecture Handout 09