Choosing the right type of financing for your business is vital if you want to stay in business and continue to grow. If you're not careful, you could end up with more debt than is manageable and find that you can't do what needs to be done. In this article, we'll explain how SME finance works and how it can keep your company growing.

1. SME Finance: A Guide
to the Basics
By – M1Xchange.com

2. Introduction
Choosing the right type of financing for your
business is vital if you want to stay in business and
continue to grow. If you're not careful, you could end
up with more debt than is manageable and find that
you can't do what needs to be done. In this article,
we'll explain how SME finance works and how it can
keep your company growing.

3. What is SME Finance?
SME finance is a type of financing that helps small and medium-sized enterprises (SMEs)
who do not have access to capital from more traditional sources. It can be used to fund
operating expenses or capital expenditures, working capital or paying off debt. The most
common form of SME finance is factoring, which allows SMEs to sell their accounts
receivable at a discount in exchange for cash up front.
Other forms of SME loans include:
 Asset-based lending – this type of loan typically covers the cost of buying new
equipment or machinery for your business and allows you to use your existing property
as collateral on the loan. A typical asset-based loan requires at least two years worth of
financial statements as proof that you are financially stable enough to repay the loan;
however, sometimes this requirement may vary depending on the amount borrowed and
other factors such as industry risk factors specific to your business sector.
 Term loans – term loans provide an opportunity for businesses with stable cash flows
over time periods longer than one year but shorter than five years (e.g., four years).
They may be used either by purchasing fixed assets or refinancing existing debt during
liquidation periods where there's excess liquidity in order better manage interest rates
paid over time vs what would happen if rates were locked into place throughout entire
life cycle

4. How to Apply for Finance
When you are ready to apply for finance, make sure you have the following
information:
 Personal details (name, address, phone number)
 Bank account details (name of bank and branch) and the amount of money that was
in your account last week
 Contact information for any companies with which you've had a direct debit or
standing order set up within the last 6 months. This may include your utility
companies or gym membership payments.

5. Why SMEs Need Finance
Finance is the lifeblood of your business. It’s what allows you
to grow and expand, to buy equipment and supplies, to hire
staff and pay for rent and utilities. Without finance you
cannot run a successful business.
The main reason why SMEs need finance is because they
operate on tight margins. The profit margins in this sector are
smaller than other industries by as much as 50%.

6. Types of SME Finance
SME finance can be divided into four main categories:
 Loans. These are the most common form of SME finance, and are usually given out
by banks or other financial institutions. They usually involve interest on the loan
that must be paid back over time.
 Debt. This is another major category of SME finance, involving loans with a fixed
interest rate that is repaid at regular intervals. It's also known as "debt capital."
 Equity. Equity financing involves buying shares in a company in order to gain
partial ownership of it; this type of SME funding typically comes from venture
capitalists or angel investors who want a larger share than they could get through
debt capital (although there are plenty of examples where both forms of investment
appear together). You'll find more information below about how equity investments
work within different types of firms' organizational structures; first let's look at some
other options!

7. The Benefits of SME Finance
SMEs can access a range of finance options, depending on their needs. These
benefits include:
 Access to capital that allows you to grow your business
 Access to advice from experts who understand your industry and your
finances
 Access to networks that provide support and mentorship, which is especially
valuable in the early stages of business development when you need help the
most
 The ability to reach new markets and customers by leveraging technology or
increasing productivity through innovation (e.g., purchasing new equipment)

8. Conclusion
We hope that this guide has helped you understand
the basics of SME Finance. The key takeaway is that
there are many options available, and it's up to you as
an entrepreneur to decide which ones work best for
your business. You should always do thorough
research before applying, as well as compare
different providers' offerings.

9. ThankYou