The art and science of SME

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An entrepreneur or business owner needs to realise and ensure that the services and products offered by a bank or financial institution help in meeting every challenge from day to day administrative details to business expansion. In addition, these packages should help a SME save on huge transaction and transfer fees on their bank accounts.

Other Cash options

A new model of finance is Bartercard (www.bartercard.com), a unique service network that is not funded on a cash basis but by goods and services exchanged or bartered with other Bartercard members. Unlike traditional credit, debit cards or cheques, a Bartercard transaction requires member businesses to exchange goods and services with each other for ‘Trade Dollars'.

These Trade Dollars are credited to the member's Bartercard account when goods or services are exchanged. Members can then utilize their Bartercard Trade Dollars to purchase goods and services from any other Bartercard member. Members save valuable cash flow and boost their profitability by taking advantage of the Bartercard network.

Bartercard is committed to helping SMEs grow and achieve financial success by facilitating a trade exchange network that offers dynamic and effective ways of conducting business. Although the concept of barter is thousands of years old, bartering through Bartercard is the most innovative way of combining modern technology, a community of businesses, and indirect and direct marketing channels to improve customer base, sales, profit and cash flow.

Going forward

The SME market is growing exponentially. New businesses are opening everyday. Banks are also realizing the importance and growth potential of this market segment.

The biggest hurdle is that of offering unsecured credit facilities to the SME sector due to lack of financial information available. In the absence of the corporate credit bureau, banks cannot make an informed decision about the financial health of a company, so financial institutions are adopting a programmed lending approach towards structuring credit facilities for SMEs.

Banks are already making headway with products and services focused in this segment with a number of new products slated for launch over the coming year.

SMEs who have been established for over three years would make a substantial base for banks to offer credit facilities. Product offering based on a lending module where companies fitting the parameters would automatically qualify for some unsecured credit facilities could be a reality for some SMEs.

Advisor Checklist

A bank or financial institution should be treated as a partner whose aim is to help you; the entrepreneur or small business owner, make the most of your time, money and resources so as to maximize returns. With more than 52 banks in the UAE alone, and more cropping up every month, choosing a bank, that fits your unique can be a daunting task. With most banks offering similar services, its hard to choose the right one.

However, here are few things to watch out for:

1. Location

Closer is not necessarily better. Consider whether or not you are willing to pay higher fees for better location, or if lower fees may be worth a little travel. Besides the location, check with the ATM locations.

Other factors such as opening hours; telephone and online banking facilities; interest rates and savings options; borrowing facilities; merchant services and introductory offers also should play an important factor while deciding on your bank.

2. Global or local

MNC banks are great with a wider range of services, but then as an SMB you could be one more company amongst millions of customers. If your business is largely restricted to the UAE, then do consider a local bank.

3. Minimum Account Balances

Many banks require minimum balances of in order to get free checking or savings accounts. Consider the amount of interest you might earn on that same amount if placed in a savings account or a CD. Also compare the monthly general maintenance fees charged by banks on checking and savings accounts. If you routinely keep enough money in your checking account to meet the minimum balance, gaining interest on that money is a bonus.

However, if you don't to meet the minimum balance requirements, an interest bearing checking account usually will have a higher monthly fee than a one that does not earn interest. Many banks are now charging high fees for copies of cancelled cheques, account research and copies of bank statements.

Overdraft protection is a service that can be very helpful to avoid returned check fees. Be sure to carefully review the terms of the agreement before you sign. Some banks are actually offering short term loans as overdraft protection, which requires a credit check and they charge you interest on the money loaned to you by the bank to cover what would otherwise be a bounced check and they might still charge you a fee for the service.

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