Most newbie SMEs in Brunei are being mislead with the SME financing facility offered by financial institution. Most bankers or the government servant paid facilitator will encourage you to take the SME loan to either startup or expand or diversify your business. But don’t blame them, because they are being paid for that purpose!
A word of advice here is…DO NOT TAKE SME LOAN if your cash-flow indicate it takes you more than 6 month to get the cash back or generate cash inflow. Because it will silently drain and eventually kill your business progress or operation. Simply because the bank will chase you for the monthly payment a month after you get the loan, no matter how is your business doing. More than 3 month of non-payment, a warning letter will be in your mail box and the longer this things happen will end you being dragged to the court by the bank.
Use only the SME loan or financing for a quick cash or quick turnover business, where you can see the cash coming in at least within a month. SME loan is not good for most business startup especially in the manufacturing or that involves industry like agriculture. It only good for if you are thinking of buying someone else existing business with good customer base or good stream of incoming cash flow.
If you are in the import and retail business, simply use the ‘Letter of Credit’ or normally known as ‘LC’ bank facility. But again you must make some contingency for unsold items, as LC normally has a credit term of 3 month, where by the third month the bank will demand FULL payment.
So before you apply for the SME loan or financing, first do a good calculation on how fast the cash will come back to your account. If it takes longer than 3 or 6 month, refrain from signing the loan application. If not you will only building bad debts instead of good debts.
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