Enterprise

Banks provide more than funds to business

cash (1)
murori

Summary

  • Banks are known to deal with money and it does not occur to many entrepreneurs that they can get advisory services, often at no cost.
  • In most cases misinformed entrepreneurs borrow money to finance their business whereas what they need is something like letter of credit from a bank or advice on how to manage cash flow for growth.

Recently I read an insightful article where Elizabeth Wasunna, the director of business banking at Absa Bank highlighted some of the funding mistakes customers make.

What caught my attention was the allegation that, “many times, customers think that funding is the only support they can get from a bank, but most of the time we need to start the conversation on a nonfinancial support basis.”

This is absolute truth. If you told people you are in a bank, what comes to their mind is you are either doing a financial transaction or negotiating a loan.

Banks are known to deal with money and it does not occur to many entrepreneurs that they can get advisory services, often at no cost.

In most cases misinformed entrepreneurs borrow money to finance their business whereas what they need is something like letter of credit from a bank or advice on how to manage cash flow for growth.

A letter of credit is a commitment from a bank guaranteeing that a buyer's full payment to a seller will be paid on time. In the event that the buyer is unable to make a payment on the purchase, the bank is obliged to make full payment or remaining amount of the purchase.

Most suppliers both locally and abroad are at home with a letter of credit. A letter of credit is not a loan. One does not draw any cash from the bank. It only cost a small fee for the undertaking and far much cheaper compared to a loan interest.

In short, banking and financing are just few of the many services offered by banks.

In additional to financial advisors that one can access every day, banks have business clubs that offer specific nonfinancial services to business customers who subscribe.

They include seminars on key issues relevant to business success, tax compliance, proper business registration, bookkeeping, educational programmes that help SMEs gain essential management skills and business trips to create business opportunities and exposure.

In addition, they provide platform for business networking, coaching and mentoring by bringing together different entrepreneurs.

They also advise customers on investment opportunities both locally and abroad, how to optimise their resources and alternative ways of financing business growth. They advise customers how to grow business at a speed they can control and avoid risks of biting more than they can chew.

Most banks have gone a notch higher by providing their business customers with self-care and personal development skills for overall health – mentally and financially.

This was well demonstrated during this Covid-19 era that has disrupted businesses and way of life. For instance, Absa bank provides free SMEs webinars on how to take your business online, self-care and taking care of mental health of both business owners and employees and most important, on leadership during a crisis.

Basically, if your bank is not offering you those nonfinancial services and much more, then you are in the wrong bank. But chances are your bank is offering them for free or at minimal cost; you are the one not taking them because you are not aware.

Mr Kiunga is a business trainer and the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market.

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