Simple proposal for authorities to support small businesses

Every now and again, politicians “discover” small and medium sized enterprises (SMEs). It is one of those buzz phrases, easy to catch the eye and ear of the voter. Let’s announce a new scheme to throw money at these companies and maybe create a few extra jobs. Maybe.

Both Romney and Obama have used the theme. In Britain, the Liberal Party is backing a US$1.5 billion scheme, as if they have discovered a new utopia. In Israel, the government the government has assigned around US$5 million for those who wish to open new operations.

Did I say maybe? Maybe some of these monies will actually reach those who need it. Paperwork, niggly conditions, lack of publicity, demands of banks running the schemes – all and more will stop many from seeing any of the funds.

Back in Israel, one of the country’s largest banks has come up with a different solution. Those regular customers applying for a loan are assigned a business mentor, who analyses the commercial needs of the company. The mentor becomes an outside voice, a shoulder to lean on. In one case that I know of, the client has already saved a fortune and made changes in its pricing strategy. The mentor is paid a fraction of the loan.

So who benefits? The bank receives a stronger customer. The business receives not just an injection of capital, but a new direction. And consider the potential knock-on effects to employment and the local economy. Simple and practical, but effective.

Did I mention that the Israeli government has just frozen much of its budget for business mentoring? Clearly, it does not like listening to advice from commercial bankers.

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One Comment on “Simple proposal for authorities to support small businesses”

  1. Joe van Zwaren Says:

    The bank’s idea of providing a business mentor to small businesses that take out loans from them is a brilliant idea. It is a win win situation where both the small businesses win and the bank wins.The business improves its chance for success and the bank improves its chance for being paid back. This is a very surprising initiative for an Israeli bank which makes it really stand out among other banks. Small business is an engine of economic growth as well as job creation.


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