Smart Credit Solutions for Businesses
About 500 thousand businesses are currently in operation in Israel, 99% of which are defined as small or medium-sized (up to 20 million NIS yearly profit for a small business, and up to 100 million NIS for a medium-sized business). A recent survey conducted by the small and medium-sized business agency in the Ministry of Economy has shown that one of the biggest challenges small businesses face is accessing the right bank and out-sourced funding.
The Purpose of Smart Credit
The majority of businesses must access credit at one point or another in the businesses’ life span. When accessing credit it is important to choose the right type in relation to the intended purpose. Here are several examples:
– Funding the creation of a new business – the business owner must access credit for the purpose of forming a new business, thus applying for outside credit in additional to his self-invested monies. Short term credit enabling a steady cash flow to the checking account is preferable in this case.
– Funding investments in the business – the business is growing and needs expansion, requiring additional equipment, machinery, buildings or employees. In this case, a long-term credit arrangement is more logical in order to avoid a financial interruption to the business’ steady cash flow.
There are many different ways of accessing business credit, and each business has unique needs which require an appropriate credit solution.
Sources of Smart Credit
In Israel, three main sources offer business credit:
1. The bank system – 5 large banking groups operate in Israel and provide 95% of the total business credit – Poalim, Leumi, Discount, Mizrahi-Tfachot and The 1st Benleumi.
The banks can provide all the credit products currently on the market, and access is relatively quick. The main disadvantage is the security requirements from the conservative banks, open making it hard for small and medium-sized businesses to succeed in accessing credit.
2. A government assisted plan – several different funds are currently in operation in Israel, which strive to develop the small and medium sized business sector. The largest of these funds is the Small and Medium-sized Business Assistance Fund through the Ministry of Economy. Over the last year, the fund has granted 1.9 billion NIS. The fund gives loans for up to 5 years, but requires up to 25% of sureties.
3. Out-sourced Credit – this refers to accessing credit through insurance companies, credit card companies, and personal sources of funding. This is usually quite an expensive form of credit, but can be provided relatively quickly and with manageable
Segment Y G Business Development Ltd adding value in business development
Accessing smart credit requires knowledge, skill and expertise in matching the right type of credit to the amount of funding the business requires.
A t Segment Y G Business Development Ltd we run a personalized review of the business, understanding its real credit needs and then working to access the cheapest and most appropriate credit for each business.