20 / February / 2023 : 11-57
Challenges of Business Financing for SMEs
Access to finance is essential for any business to thrive and grow. However, businesses, particularly small and medium-sized enterprises (SMEs), often face numerous challenges when trying to access finance. Here are some of the common challenges:
Lack of collateral: Financial institutions require collateral to mitigate their risks in lending money. However, many SMEs do not have sufficient assets to pledge as collateral. This makes it challenging for them to access traditional financing options such as bank loans.
Limited credit history: Businesses that are relatively new or those that have not borrowed before may not have a credit history. This can make it difficult for them to access financing, as lenders are reluctant to lend money to businesses with no proven track record.
High-interest rates: For businesses that are able to secure financing, the interest rates may be high, making it difficult for them to repay the loan. This is particularly true for SMEs, which often lack bargaining power and are seen as high-risk borrowers.
Stringent lending criteria: Financial institutions have stringent lending criteria that businesses must meet before they can access financing. This includes minimum revenue and profitability requirements, which can be difficult for SMEs to meet.
Limited access to alternative financing options: While traditional financing options such as bank loans may be difficult to access, there are other financing options available, such as crowdfunding, invoice financing, and peer-to-peer lending. However, SMEs may not be aware of these options or may not have the resources to explore them.
Economic and political instability: Economic and political instability can make it challenging for businesses to access financing. This is particularly true for SMEs operating in developing countries, where economic and political instability is common.
In conclusion, businesses face various challenges when trying to access finance. However, by exploring alternative financing options, building a strong credit history, and maintaining good relationships with lenders, businesses can improve their chances of securing financing and achieving long-term growth and success.
Published on 20 / February / 2023 : 11-57
Published by
Liana Aloyan
Journalist, columnist. Liana studies at the Faculty of Russian Philology of Khachatur Abovyan State University. She has been working at Yelaket (Yelaket.am) news agency since 2019 as a journalist and columnist. Writes articles about business and marketing. Liana is a member of "Media association" since 2020.
Viewed
610times
Recommended
21 / February / 2020
Where Do The Richest Americans Live?
Have you checked the newest "Forbes 400: The Full List of The Richest People in America" yet?
Surprise, Bill Gates, with a net worth of $81 billion, is ranked No. 1 for the 23rd year running....
17 / June / 2021
Gold loses its shine as Fed hints at rate hikes
The Federal Reserve surprised the market Wednesday with projections that future interest rate hikes will come a bit sooner than expected. Gold bugs in particular were disappointed.The price of gold...
17 / June / 2021
Jobless claims unexpectedly rose last week
Claims for unemployment benefits rose unexpectedly last week, marking the first increase in initial claims since late April.Another 412,000 workers filed for first-time benefits in the week ended...
16 / July / 2021
Abu Dhabi’s maritime sector strategy shifts to diversification, less reliance on oil
“No one is safe, unless everyone is safe” is the thinking behind herculean efforts to immunise the world against Covid-19.Abu Dhabi, capital of the United Arab Emirates (UAE) and a strategic hub...
15 / February / 2022
Ameriabank is the first in Armenia to place green bonds via public offering
Ameriabank announced today public placement of nominal, coupon, book-entry bonds with the total volume of USD 8 million and AMD 3 billion during the period from February 14 to April 22, 2022,...
22 / February / 2022
Ameriabank receives another IFC award in trade-finance sector
Ameriabank CJSC has been named the Best Issuing Bank in the Caucasus for 2021 by International Financial Corporation (IFC), a member of the World Bank Group, in the 10th annual award ceremony in...
02 / March / 2022
Global Finance Names Ameriabank “Best Investment Bank” in Armenia
Global Finance reputable magazine has published the list of winners of the World’s Best Investment Banks 2022 Award, naming Ameriabank the “Best Investment Bank in Armenia” for the seventh year in...
31 / March / 2022
Ameriabank’s ‘Live Armenian,’ ‘Live with a Smile,’ ‘Live Limitless’ promotional draws’ winners...
Ameriabank on Wednesday summed up the promotional draws “Live Armenian”, “Live with a Smile” and “Live Limitless” and announced the results.From December 9, 2021 to March 9, 2022, the Bank offered...