The FINANCIAL — At a time when over 80% of Georgia’s population is employed by the SME sector, provision of adequate financing still remains a big headache for the majority of those enterprises.
According to USAID EPI research, SME owners/managers and other industry experts identified the following areas that represent barriers or obstacles to SMEs obtaining banking and non-banking credit. They include:
Limited supply of alternatives to commercial bank loans. Limited supply of capital market instruments, such as private equity funds. Venture capital is not a developed sector in Georgia. The Angel Investor sector is not developed. High interest rates and excessive collateral requirements for loans, insurance and leasing services. A Government Guarantee Scheme does not exist.
Experts agree that getting finance from banks for start-ups in Georgia is almost impossible.
However they claim that key areas existing SMEs have to work on in order to get loans is to improve book-keeping methods, other financial information and also introduce comprehensive planning.
“There is a huge competition among banks to offer the best services and rates to existing clients,” George Simongulashvili, partner at consulting firm GEC Corp, told The FINANCIAL.
“When it comes to new clients banks are risk averse and they look at all the details such as how long the company has been on the market for, their cash flow, comprehensive analysis of financial statements and even inquiry of the owners of the company,” he said.
“Financial advisory consulting is sorely needed in SMEs as most of them don’t have adequate financial information at hand and banks themselves have to spend time investigating their account balances. Therefore we help those companies to collect all such necessary information, structure it and get them ready for taking out a loan from the bank. Even after the loan is disbursed, we run monitoring of the loan until it matures. There are often cases of a company paying interest for a loan it has taken from the bank while there are problems within the organization which banks can’t see even when the interest is being paid on time. For example it’s often the case when at the time of interest payment, the company takes interest payable from other areas/resources of business thus putting its future development plans at risk,” noted Simongulashvili.
“Encouraging entrepreneurial spirit is a very important point in Georgia,” said Kakha Kokhreidze, the author of the draft law on small business, AmCham SME Committee Chairman, as well as Vice President of the Georgian Small and Medium Size Enterprises Association.
“We see great potential in people. We believe that vision, commitment and hard work guarantees success. Many things depend on the managers. They must create an environment where people will be able to devise products and/or services that are interesting for customers. Be innovative, different, pay attention to details, create good teams and empower them to be actively involved in decision-making. This means that firms need to be customer and employee oriented at the same time. It is also necessary to have a good plan, which is the foundation for getting a loan. Creating a comprehensive plan is not an easy process. Therefore investing in research and at the same time in people is always profitable,” he said.
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