22 Jul Relive your SME through Financing

The most common source of capital among SMEs is banks, however, they are not the only options, he assures (Cadena, 2021). There are multiple to consider.

Until last April, the bank loan portfolio for small and medium-sized companies (SMEs) was 396 billion pesos (mp), 8% less than the same month in 2020, which reduces the possibilities of this type of company to acquire financing and be able to overcome the blow by the covid-19 pandemic.

However, at present, the Mexican market offers a rich menu of financing options for different types of companies, at different times of growth, says Luis Franco López, coordinator of the Innovative Entrepreneurship Zone of the Monterrey Institute of Technology and Higher Studies Campus Ciudad de México, and Rodolfo Lanzagorta, partner of innovation and Digital Banking of the consulting firm EY México.

Perhaps the most conservative SMEs want to continue trying with bank credit, or opt –if they are in the Mexican capital– to join the Impulso Nafin Mexico City program, launched a couple of week ago by Nacional Financiera and commercial banks; However, in both cases it must be taken into account that the conditions are more complex, with high interest rates and limited credit amounts that do not always cover the amount requested by entrepreneurs. López and Lanzaforta affirm, who give some alternatives:

The three ‘F’

In our first option we have loans from the first circle of trust such as family, friends and a risky investor. In English it is known as family, friends and fools, who can offer the entrepreneur small amounts of loans, but with the advantage that the money is obtained without interest and without many bureaucratic complications. Ensures López, from the TC of Monterrey.

Join effort

There are sources of collective financing, known as crowdfunding, digital platforms that can work for those who start or for those who want to grow. An example of this in Mexico is Kickstarter, in which an entrepreneur presents his project, establishes an economic goal and a date, so that possible sponsors make contributions.

“If the amount is reached, the capital is delivered to the entrepreneur; but if not, everyone takes their money. In this type of financing, the platforms keep around 5 percent of the operation and that must be considered”, warns López.

For entrepreneurs

We also find venture capital funds, such as Dalus Capital or Ignia, which generally seek more consolidated companies that promise future returns, so they focus on supporting certain businesses.

“Dalus Capital seeks financial, educational or health technology service ventures, among other business niches,” says López, from Tec de Monterrey, adding that “these funds provide the necessary money – from 500 thousand pesos to several million. But they also ask for a percentage of participation in the company”.

Of the fintech

With the evolution of fintech or also known as financial technology companies, financing options for SMEs have grown in Mexico, explains Rodolfo Lanzagorta, from EY.

An example of this is Konfío, the expert mentions. The procedures are faster than in banks and, in the case of this fintech, the amounts range from 100,000 pesos to 3 million pesos for those who start or of greater value for more mature companies, although it is important to have one guarantee or endorsement.

An angel for you

Entrepreneurs can also consider angel investors, such as AngelVentures, who are individuals or companies who, in addition to money, provide relationships or business advice to grow. In return, some ask for participation in the company.

Sofomes

The Multiple Purpose Financial Companies, such as Bien para Bien, offer financing with more flexible and faster requirements than banks and also, they can present higher amounts; but proportionally their interest rates are also higher and they also require a guarantee, explains Rodolfo Lanzagorta.

References

Cadena, G. (2021). Revitaliza tu Pyme. Ciudad de México: Milenio. Obtenido de https://www.milenio.com/negocios/finanzas-personales/creditos-pymes-sofomes-crowdfunding-diferencias-requisitos