Caribbean Export OUTLOOK 3rd Edition

Clearing The Hurdles 92

pledging assets or drafting security or legal documents; • Bills of Exchange have been practical options for SMEs who have partnered with banks to guarantee exchange of payments to clients; • Cash Advances; in many instances, SMEs have used various dynamics to obtain cash from their buyers. These instances generally present themselves when conditions are favourable to urgently needed goods. This of course, requires tact so as not to reveal to the buyer the situation pertaining to the lack of funds; • Promissory Notes which is a simple contract that shows and contains the promise to pay. These solutions have all assisted SMEs and have allowed them to mitigate risks, enhance their attractiveness to buyers, negotiate better credit terms from suppliers for raw materials and enhance their competitiveness while side stepping the common financing challenges. New Frontiers The Caribbean can benefit from new trends in SME financing that have the potential to make finance more accessible to companies. Here are a few that the Caribbean should take note of:

• Intangible Asset–Based Lending (IABL) leverages a portfolio of Intellectual Property (IP) or other intangible assets to secure a loan.The loan can be backed by the stream of revenues tied to a single intellectual asset or to the firm’s entire portfolio. In either case, firms can secure their intellectual assets in addition to a blanket lien against common collateral such as real estate or receivables. This requires banks to invariably partner with IABL firms who have this expertise to ensure they can lend or through private equity firms, to bring these new ideas to life. Given that theCaribbean is a fertile ground for the arts, IABL is certainly important for funding the creative sector. This approach is used in the developed economies and the challenge will be the paradigm shift required. It should be noted that the banking industry within the Caribbean would be required to adopt this initiative particularly internationally owned banks, who have experience in leveraging these options in North American markets. However, the main challenge remains as risk appetite for lending to SMEs is low in the Caribbean. Specially tailored credit enhancements such as guarantee schemes are required to boost the attractiveness of these new methods in the Caribbean region;

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