Importance
The economic and social importance of the small and medium enterprise (SME) sector is well recognized in academic and policy literature. It is also acknowledged that these actors in the economy may be under-served, especially in terms of finance. This has led to significant debate on the best methods to serve this sector.
Although there have been numerous schemes and programmes in different economic environments, there are a number of distinctive recurring approaches to SME finance.
- Collateral based lending offered by traditional banks and finance companies is usually made up of a combination of asset-based finance, contribution based finance, and factoring based finance, using reliable debtors or contracts.
- Information based lending usually incorporates financial statement lending, credit scoring, and relationship lending.
- Viability based financing is especially associated with venture capital.
- Reliable for all the small ticket loan.
Read more about this topic: SME Finance
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