By K. C. Soares, ContributorI RECENTLY attended a forum put on by the Small Business Association of Jamaica (SBAJ) at the Holy Cross Church Hall in Kingston. The theme of the forum was 'Funding Opportunities in the Small Business Way' and it was held at 6:00 p.m. (it actually started at 6:30 p.m.)
There were four speakers two of whom were from financial institutions which deal exclusively with the small business sector. Present were about 30 - 40 small business operators. Among this total were persons who were interested in starting a business. The look on the faces of those nearest to me reflected tiredness and varying degrees of frustration. This could well be the resultant effect of a hectic day. Or, could it be that these persons were frustrated in attending forums of different sorts without any real improvement in their well-being?
Small business operators came from as far as May Pen, Mandeville and Black River. The fact that these people travelled long distances so late in the evening is a clear indication that there is great demand for funds within the small business sector. Many of those who came from outside the corporate area had to close their business place before time in order to meet the 6:00 p.m. start time. Chances are they would have lost revenue from the early closure of their businesses.
As far as I am concerned, the presentations of the panellists from the financial sector were disappointing. Both told the audience that they have money to lend. This as far as I know is not entirely true and to give the impression that a significant amount of money is available to lend is simply dishonest.
COLLATERAL
They also stressed that the applicants should have adequate collateral together with a good market survey. These requirements as we all know are lacking among small business operators. The absence of quality collateral and the lack of proper documentation are among the main reasons why these institutions were established to help the small businessman who is turned away by the commercial banks.
Therefore, to insist on good collateral and a market survey is not in keeping with the basis on which these institutions were formed.
As I am privy to information that there is little or no funding available from these institutions, it is my view that loan applicants seeking funds will end up frustrated. Rather than telling the applicants that there are no funds available, these institutions tend to request documents and information which they know the applicants would be hard pressed to furnish. Herein lies the frustration. We cannot go on like this.
If there is no money available then the potential borrowers should be told. To have an applicant getting valuations, market surveys, bank statements, photographs etc. only to give him a run-around is certainly not in the best interest of development. All the requested documents cost money. In some cases the small businessman is forced to incorporate a company. This item alone constitutes a significant cost. For the small businessman to be spending without getting any funds in return will only make his position worse. The question may be asked what should be done at this time?
NO FUNDS
My suggestion is fairly straightforward. First, the financial institutions should be honest with the small business operators. They should come up front and say that there is little or no funds available at this time, rather than setting them up for a run-around. I had in a previous article ('Funding Your Business Idea') suggested that, as it now stands, the small businessman should forget these institutions and build up a relationship with the commercial bank. In the meantime, the financial institutions should improve the quality of their managers and project officers who would then be better able to assess loan applications. With better managers there would no longer be the need for the applicants to provide market surveys as is now being requested. This would be a saving on the part of the applicant both of time and of money.
When businessmen close their businesses early to travel long distances to a forum on funding, they do not do so to hear that the inflation rate is down. They do so to hear how they can get these funds at the least expense to them and in the shortest possible time. Furthermore, forums should not be centralised in Kingston but should be taken to the different parishes to facilitate easy attendance.
Fancy names for different programmes get us nowhere if the funds are not disbursed to applicants in adequate amounts and on a timely basis.
K. C. Soares is a former banker and is now a business consultant with Soledad Financial Services Limited.
E-mail: soledad@netcomm-jm.com.
