SME Financing

 SME  finance  is  the  funding  of  small  and  medium  sized  enterprises,  and represents a major function of the general business finance market – in which

capital for different types of firms are supplied, acquired, and priced. Capital is supplied through the business finance market in the form of bank loans and overdrafts;  leasing  and  hire-purchase  arrangements;  equity/corporate  bond

issues;  venture  capital  or  private  equity;  and  asset-based finance  such  as factoring and invoice discounting.

SMEs are vital for economic growth and development in both industrialized and developing  countries,  by  playing  a  key  role  in  creating  new  jobs.  Small

businesses  are  particularly  important  for  bringing  innovative  products  or techniques to the market.

 

Criteria/ Sectors Fixed assets excluding land & building (Tk. in crore)     No. of manpower Medium Small Micro Medium Small Micro   Manufacturing   10-30   0.5-10 0.05- 0.5 100- 250   25-99   10-24 Trade 1-15 0.05-1 <0.05 50-100 10-25 <10 Service 1-15 0.05-1 <0.05 50-100 10-25 <10   Cottage Industry <0.05 <10

[According to Bangladesh Bank (SMESPD Circular No.1 dated 19 June, 2011), the cottage, micro & SME is newly defined the industry/enterprise:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

An industry or enterprise can be treated as that category one following a benchmark but the same can fall under higher category if another benchmark is considered. In that case it will be treated as higher category industry.

A woman, who owns a private firm or she holds minimum 51% stake in firm run jointly or registered, will be treated as women entrepreneur.]

 

28. SME Foundation

SME Foundation formed in year 2006 under the Company act-1994. It plays the role in helping the SME entrepreneurs including the women entrepreneurs by

conducting various types of developing programs in Bangladesh. One of the

major  aims  is  to  promote the  economic development through employment generation, reduction of social discrimination and poverty. The main activities

are: implementation of SME policy, advocacy & research, credit wholesaling

program,  capacity  building  &  skill  development,  access  to  information  &

technology, women entrepreneurship development, business support, etc.

Sensitivity Analysis

 Sensitivity analysis is a simulation analysis that the key quantitative assumptions and computations are transformed systematically to assess their effect on the final outcome for a project. It is a way to predict the outcome of a decision if a situation turns out to be different compared to the key predictions. Financial institutions By using sensitivity analysis, financial institutions can evaluate the overall risk of critical factors, changes in interest rate and capital cost for alternative outcomes of their financial situations.

Preference Share

 Preference share is a capital stock which provides a specific dividend that is paid before any dividends which takes precedence over common stock. Preferred stock shareholders do not enjoy any of the voting rights. The main benefit to owning preference shares are that the investor has a greater claim on the company's assets.

In general, there are four different types of preferred stock- (1) cumulative; (2)

non-cumulative; (3) participating; and (4) convertible preferred stock.

 

Pari Passu Charge

 Pari Passu is a Latin phrase that refers to equal footing. It describes the situations where two or more assets, securities, creditors or obligations are equally managed.

In finance, the term pari-passu refers to loans, bonds or classes of shares that have equal rights of payment, or equal seniority. In addition, secondary issues of shares that have equal rights with existing shares rank pari-passu. Wills and trusts can assign an in pari-passu distribution where all of the assets will be equally divided between the named parties.

Packing Credit

 Packing credit is one of the best financial assistance by bank to promote the export trade that helps exporter finance the cost of buying or making a set of products, and then packing and transporting them before shipment occurs. It will often be extended if a letter of credit has been issued by a purchaser in another country or a confirmed order for exporting the goods exists. To obtain packing credit, the exporter has to approach the bank with export order. Bank official visits the exporter’s factory and assess the goods value with export order.