Banks 'leaving SMEs in need of factoring'

15/02/2008

The "unrealistically conservative" practices of banking groups leave many small and medium-sized enterprises (SMEs) in need of factoring and debtor finance solutions, it has been suggested.

According to experts at the South African asset-based lending firm Merchant Factors, many SMEs find it difficult to do business with banks whose lending rules are designed with larger corporations in mind.

Merchant Factors has also urged the South African government to recognise the benefits factoring brings to SMEs and to remove the prohibition on third party involvement in their tender contracts, as debtor finance agreements are interpreted.

"Whilst we fully understand the rationale for this condition, this prohibition inhibits the ability of the SME's to raise funds by ceding the right to payment to the factor," Johnny Philippou, managing director of Merchant Factors told Cape Business News.

The Institute of Chartered Accountants in England and Wales reported recently that confidence among finance professionals around the UK has dropped considerably in recent months.