Difficulties/Challenges that SMEs and Large firms face in financing. Example: difficulties that SMEs and Large firms are facing during their business operation
The COVID-19 pandemic is the root of so many business problems in the past 2 years. This was disastrous for both new business and established business owners in almost every field, as the pandemic financially crippled small and medium enterprises (SMEs) alike. However, small-scale businesses did not suffer in this disaster alone, as large firms and multinational corporations (MNCs) also experienced the tremendous effect caused by the economic downturn.
Vaccinated, under control, and Covid-19 blew over
Although COVID-19 is under control, for the most part, world issues such as food shortages, and the rise of oil prices have been speculated to be the main cause of many businesses' downturns. Let’s face it, the world is littered with issues and problems are inevitable in every business.
Having mentioned that, it is clear to conclude that business owners, from SME to corporate level, require a solid fallback plan and risk management team to handle the unprecedented issues. Experts have pointed out that most businesses have financial problems during their operations. Those financial problems include:
- Having limited access to cash flow
- Lack of preparation plan and risk management strategy
- Acquiring debt without a proper pay-back scheme
- Terrible budget management
- Poor tax compliance and obligation
- Lack of capital to support business operation
- Impact of governmental policies
- Economic impacts such as inflation and recession.
All of the financial issues mentioned above are very common for most business owners. Moreover, the majority of them are related to the lack of capital and investment. As much as individuals require money, businesses simply cannot continue to operate without any capital. In which case, the lack of capital will drive a business to bankruptcy.
However, thanks to the hard-working Cambodian government, the Ministry of Economy and Finance (MEF) has put immense effort into creating the first-ever Credit Guarantee Corporation of Cambodia. Credit Guarantee Corporation of Cambodia Plc. (CGCC) is a state-owned enterprise that was established and operated under direct technical and financial support from the MEF. CGCC also offers two different types of guarantee schemes and one among them is the “Business Recovery Guarantee Scheme (BRGS)”.
What is BRGS?
The Business Recovery Guarantee Scheme (BRGS) is one of the first credit guarantee schemes created by CGCC to provide for those who are in need. Its main objective is to provide all businesses including micro, small, and medium enterprises ( SMEs), as well as large firms with access to financial loans for various types of business purposes. Another crucial objective of this loan is to help businesses that were financially affected by the COVID-19 pandemic. Please also note that the Business Recovery Guarantee Scheme is created to be in line with the policies of the Royal Government of Cambodia which is mainly to support all businesses that struggle to continue operations in harsh economic situations.
- What are the requirements or eligibility to apply for BRGS?
To verify whether your business is eligible for the Business Recovery Guarantee Scheme, please refer to the criteria listed down below:
- The Borrower must be a majority shareholder of the Cambodian-owned business who owns more than fifty percent (50%) of the total share
- The Borrower must produce a business registration issued by appropriate government authorities under the laws and regulations of the Kingdom of Cambodia
- In the case that the Borrower is a non-registered business, they must proceed with registration after the guarantee is approved. If the borrower remains a non-registered business, an additional guarantee fee of 0.5% per annum of the guaranteed amount will be incurred at every year-end of the guarantee.
- All Borrowers should be financially viable. The Borrowers should be able to generate enough income to cover operating expenses and debt obligations.
How does BRGS help both SMEs and Large Firms?
The Business Recovery Guarantee Scheme (BRGS) provides up to 200 million USD, 150 million USD of which will be given to support small and medium enterprises (SMEs) while another 50 million USD will be directed to large firms. There are a few main sectors that were prioritized to receive this financial loan including the agriculture sector, industry sector, service sector, and other non-priority sectors. The difference between priority sectors and non-priority sectors will also differentiate the annual rate of the loan. Business Recovery Guarantee Scheme (BRGS) offers 1% of the outstanding guaranteed loan to priority sectors and 1.5% of the outstanding guaranteed loan for paying the annual guarantee fee. Please also note that the guarantee term of the Business Recovery Guarantee Scheme (BRGS) is 7 years. Additionally, business owners who aim to apply for loans should note that SMEs can receive up to 500,000 USD and large firms receive up to 1,000,000 USD per single borrower.
Should SMEs and large firms apply for BRGS? Why?
It is a rare opportunity that SMEs and large firms to apply for a loan while receiving support from the BRGS as collateral or security from 70%-80% of the loan amount borrowed from the Participating-Financial Institutions (PFIs). This would provide SMEs with a better chance of obtaining a higher profit margin and stronger business operations. Moreover, SMEs and large firms also gain more credits in terms of applying for loans when they apply for BRGS. The credits obtained will provide an advantage for large firms in applying for other loans in the future. Ultimately, successfully securing this loan will help the business considerably in terms of investment and business expansion based on your firm’s goals.