6 ways SMEs can access working capital through alternative financing
- When seeking financing, small businesses often require collateral as they are traditionally seen as high financial risk by major lenders
- Fintech innovation, government support and greater banking openness help generate variety of new funding avenues
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Despite making up over 96 per cent of businesses in the continent, SMEs tend to face high obstacles when seeking out traditional forms of financing.
They may be perceived as a higher financial risk by banks, or may not have the standardised accounting practices and credit scores that traditional financial institutions require.
As a result, many banks require extensive collateral from SMEs. These are sometimes business-critical assets, such as the property business is conducted in, or the vehicles used for business operations. If such assets are seized when an SME fails to pay back a loan, the business may never recover.
However, today SMEs have improved access to working capital through alternative financing options. In Hong Kong, a combination of fintech innovation, government support, and openness from banks has opened up a range of new avenues for SMEs to access funds.
Government grants