CHARACTERISTICS OF SMES
We can group the different characteristics of SMEs as advantages and disadvantages that they present in their business life.
- Capacity to generate stable jobs, absorb a significant part of the economically active population;
- Adaptation to new technologies
- Contribution to regional development where they are located
- Flexibility to the size of the market where they are inserted
- Knowledge of the payroll of employees, which allows to easily solve the problems that arise
- Price competitiveness, they produce and sell items at competitive prices, since their expenses are not very large and their profits are not excessive;
- Maintain a unit of command, which allows them an adequate link between administrative and operational functions;
- The owners generally have a great knowledge of the area they operate, allowing them to apply their income, talent and capabilities for the proper running of the business;
- They are closer to their customers, it is one of the most obvious advantages. They deal in a more direct way with their customers, which allows them to know their needs more easily and offer a more individualized service, and even establish personal and attachment relationships with their users;
- Speed in decision making, since it falls on a person or a small group.
- Ease in forming bonds and knowing the qualities of others, which allows increasing performance and forming better work teams.
- Communication will be easier; this allows new ideas to flow and problems to be solved as a team.
- Greater vulnerability to problems that may arise in the economic environment such as inflation and devaluation;
- Great suffering in periods of crisis, which produce a decrease in sales
- The lack of financial resources limits them, since they do not have easy access to sources of financing; they lack the financial muscle available to large companies. Therefore, they will usually need external financing, which will also be more limited and in worse conditions, without the ability to access financial instruments that large corporations do have, such as listing on stock markets.
- They maintain a great political tension since the big businessmen try by all means to eliminate these companies, so that free competition is limited or disappears outright;
- Difficulty reaching a large number of customers and earning their trust;
- Non-specialized administration
- Inexperience in economic issues
- Little bargaining power with suppliers and customers, it is much more difficult to achieve beneficial conditions and they are often forced to give more than they would like.
Other features may be that:
1- SMEs are mainly family businesses, a high proportion of SMEs are firms that were born and are managed by family groups.
2- They have good organization, which allows them to apply and adapt to market conditions and the growing population;
3- They have a great mobility, allowing them to expand or decrease the size of the plant, as well as change the necessary technical processes;
4- Due to their dynamism, they have possibilities for growth and to become a large company;
5- Most industrial SMEs are companies with enough experience in their activity that have already been in the market for several years
IMPORTANCE OF SMES AND THE ROLE OF THE STATE IN RELATION TO THEM
Small and Medium Enterprises are the basis of a country’s productivity and generate a positive impact that exceeds the benefit received by the owner himself. In addition to generating wealth, they are important generators of labor helping people in a certain place to work and be satisfied with the life they lead in their place of origin.
Several countries such as the United States, Japan and the European Union rely on policies to strengthen and promote the growth of their smaller companies.
The role of the State in relation to SMEs is fundamental, as previously written they are the main engine of a country for its growth; then it would be logical for the State to provide them with useful tools for their development since this growth of companies produces, like a mirror, a social improvement in the country, more employment, more technology, more sales.
CONCEPT OF FINANCING AND CREDIT
Financing is the set of monetary and credit resources that will be used to carry out a certain project or to the ordinary expenses of the company. (Allo, 2014)
One of the great objectives of any company is its survival, and to guarantee its continuity it must provide financial resources. The sources of financing will be the ways that the company uses to obtain funds.
USEFULNESS OF FINANCING
The usefulness of financing for a company is vital, without this it will move with difficulty in its environment. It is the fuel on which the business runs, the type of financing selected will depend on the desire to borrow, the solvency that the company has to support the payments and the moment in which it decides to take it.
Companies can use financing basically to:
- Fulfill their current obligations such as the payment of salaries to employees or small purchases. Generally this funding is requested every month.
- Expansion of the company to other markets or regions to grow and take the opportunities that appears to it.
- Repairs of goods of use either by natural cause or by some catastrophe suffered such as fires, floods, earthquakes.