Money may make the world go round, but that doesn’t mean you shouldn’t save it when you can. With loans often hard to come by, small businesses tend to struggle more than others when it comes to maintaining healthy finances. Fortunately, there are plenty of ways to cut costs without compromising the quality of your goods or services. Here are a few tips to tighten your company’s belt.Don’t be afraid to call in a favor.Whether it’s a friend, a friend of a friend, or just a perfect stranger, it never hurts to ask for a little help. Drawing on your network for favors or an exchange of services helps you get things done for free, but also keeps your connections in touch with your business. Whether it’s for design, editing, or just plain old advice, favors and exchanges can help you keep your company costs low while still accomplishing everything you need to get done. Just remember: don’t ask a person for a favor if you wouldn’t want to return the service.Never pay sticker price.All companies need certain tools and equipment to grow, which means you shouldn’t be afraid to pick them up secondhand if you really need to. Websites like Craigslist are great for finding used goods of all kinds. And if you don’t want to settle for secondhand items, consider purchasing older models of the products you need. They’re almost always cheaper and comparable in quality to the newer editions.Market your product online.If you’re running a small business, the Internet is your best friend. Access to the Internet offers a myriad of tools to expand your business. Looking to launch new marketing initiatives? Social media platforms like Facebook, LinkedIn, Twitter, Tumblr, and WordPress are FREE services that offer unlimited possibilities to help your company go viral. Lacking the manpower to run your social media outreach? Try Hootsuite, an application that allows you to schedule posts ahead of time, so you can work on other projects while Hootsuite manages your brand. Want to see if your marketing efforts are working? Use Google Analytics and its easy-to-read charts to gauge how much traffic your site is generating and assess the demographics of the users that your site attracts.Communicate effectively.When it comes to effective communication within a small business, what you say matters just as much as how you say it. And this isn’t just about using proper spelling and grammar. To run your business most efficiently, there are plenty of apps to help you communicate and share information with your staff. Google offers an entire suite of applications to help you email, edit documents, sync calendars, and more. Dropbox helps you save and share all of your documents, images, and videos of any size such that you can access them on any of your Internet devices. And when your business calls for some pseudo-in-person communication, Skype and VOXOX also offer great options for voice calling and video conferencing.Account for everything.QuickBooks is a great accounting tool for small businesses, but at $200 a pop, it can be a bit pricey. Fortunately, there is a wealth of free accounting tools and cheaper alternatives to consider. Wave Accounting offers a completely free double-entry accounting app, as well as apps for invoicing, receipts, payroll, and more. Freshbooks, Outright, and Zoho Invoice also provide excellent free alternatives for small business accounting.Travel without breaking the bank.For an expanding business, travel is sometimes an inevitable expenditure. Get the best deal on airfare through a number of online services. Sites like Kayak are great for searching for the lowest fares, as they aggregate flight data from hundreds of websites to help you find the best deal. As airline prices are notorious for their daily fluctuations, price alert websites like Airfarewatchdog.com and Yapta are supremely useful. Sign up and they’ll notify you as soon as a flight you’ve been eyeing hits a low fare. And if you’re on the fence as to when is the best time to buy your tickets, Bing’s Price Predictor can help you decide whether to buy or wait for a lower fare.When it comes to cost cutting, business owners should think broadly. Saving money on your small business loan is just as important as saving money on your office supplies. What are some of your favorite cost cutting tips?

This is an interview of serial entrepreneur Marc Gorlin, co-founder of Kabbage. The interviewer asked him some questions about his company which helps provide working capital to small and medium businesses.

On Monday, 27 May, I attended a meeting on gender finance co-sponsored by IFC and the Russia Association of Regional Banks (ASROC). More than 20 banks were present from all parts of the Russian Federation.  There were case studies provided by speakers from BLC in Lebanon, and the Royal Bank of Scotland.  The topic hasn't been well developed in Russia, but there was strong interest expressed, and follow up is expected.  This is clearly a rising topic, particularly in countries where the SME finance market is becoming more and more competitive, and banks are looking for niche advantage.  Of course, gender finance doesn't just involve women entrepreneurs, there are important other services for women consumers...across the board, women make loyal clients who have a higher cross-sell ratio, and who attract their friends to the banks they like.  Russia looks fertile ground for gender finance, not in the least because (if I heard this correctly) 65 of the ASROC institutions are headed by women.  The papers from this meeting should be available soon through the Forum...contact nadia afrin of the Forum at nafrin@ifc.org for details.matt

you will have to write to Oliver Wyman to get a copy of this very interesting paper by Peter Carroll and Ben Hoffman, but it's worth it.  While the focus is on the USA, the paper is a great and concise description of how banks should be looking to transactions records to build  the strongest SME businesses, in this era when more and more SMEs do more and more of their business on credit cards.  It cites pioneers like Capital Access Network, Amerimerchant and OnDeck Capital, who have been discussed in our Forum.  Their key point, which I believe soon will apply equally to emerging markets (particularly for larger banks), is that this is becoming the standard way of driving SME business.  The article makes the important point that this approach allows banks to offer different types of credit products for SMEs, in particular standby lines, that SMEs often say they want, but rarely can get with the flexibility and responsiveness needed. They estimate the market for this as approximately 8 million lines for $80-120 billion, with a potential after tax profit of $1.5-2.5 billion.   It also notes how this approach not only reduces marketing and underwriting costs, but also loan administration. the article also points out that third party providers can provide platforms for running such programs for banks (as we well know, as several of them have partcipated in our discussions on emerging markets!)...and it points out that many of these (as is the case for our commenters) also have their own finance companies, opening up possibilities for dividing up markets and leaving the riskier prospects to the platform partners.overall, a very useful overview of this approach, and just 7 pages!  worth a read...write to OW for more...maybe they will comment further?matt

On May 3, 2013, the Global Financial Markets Group (Wendy J. Teleki) hosted an event with senior staff from across the World Bank, presenting the final outcomes of the SMEs & Value Chains Committee and engaging in frank and nuanced discussions with attendees about next steps.Eva Csaky opened with an overview of the complex relationship between SMEs, value chains (VCs), and job creation.  Trade has been exponentially growing since the 1980s, but close to 80% of all global trade is being channeled through global value chains.  These value chains, she shared, are increasingly active in emerging markets – and not simply to source raw materials.The committee concluded that for IFC’s efforts to be successful, we need to understand the nuance between country and sector variables in our selection of projects, since the dynamics of global value chains vary significantly between these two factors.  Careful partner selection is key – if we partner well, we can achieve significant reach and impact. SMEs in the value chain have difficulty engaging with transnational corporations, which is an area that IFC partnership can add significant additionality.  The 200 largest transnational corporations are associated with half of all global economic activity.  Furthermore, of the 100 top global economic players, 48 are countries, while 52 are corporations.There are a number of forces working both for and against SME inclusion in global value chains. For example, stringent agricultural specification requirements (like the color of produce) often lead to major quantities of production getting refused by buyers. To meet such requirements, SMEs need to invest in greater capacity and improved technology. Companies are increasingly facing reputational and operational risk, as evidenced by the recent tragic events in Bangladesh.  IFC can positively impact this space by working with the entire ecosystem – in addition to financial assistance, working with corporations on the enabling environment, with intermediaries and aggregators, partners.GTSF & GWFP Leading the WayAccording to Susan Starnes and the SMEs and Value Chains committee, we have the capacity to address each challenge in house, at all stages of the value chain; we just need to make focus.  Two examples of successful engagement from Trade & Supply Chain (TSC) stand out: the Global Trade Supplier Finance Program (GTSF) and the Global Warehouse Finance Program (GWFP).Emerging market SMEs have limited access to finance and those with access struggle because they are paying local rates (usually over 15%), do not have much working capital, and have no knowledge of reverse factoring.  Global buyers, on the other hand, have decent risk ratings and lower interest rates, and are faced with the challenge of finding a supplier that will provide goods consistently.  IFC’s solution with GTSF is to take the buyer’s payment risk, buying the receivables from the suppliers.  The buyer then pays receivable to IFC on the due date, with a lower interest rate. Prices factoring is based on buyer’s risk, getting low-cost financing to the SME supplier view IFC. The program has achieved tremendous success thus far: in the last year alone, GTSF supplied more than $900m to suppliers in Mexico, Indonesia, Vietnam, India and China. They are looking at Africa next, and for partnerships with supply chain payment logistics companies. GWFP partners with banks in a region to provide commodity-backed financing to farmers, so they can sell crops at an appropriate time (and do not have to pay as soon as product leaves the ground). “We can be more powerful when we innovate how we work together, not what we do – what we do is already very, very powerful.” Susan K. StarnesThe SMEs and Value Chains Committee believes that focusing on an integrated, focused approach utilizing all capabilities across the World Bank Group at each stage of the value chain is a way to achieve this, and determined these 6 steps:

• Short list value chains for IFC engagement (country and global VCs as entry points)
• Apply filters and determine sequencing
• Identify pain points along the value chain: as goods move “from farm to fork”, who are the players, where is their growth delayed/blocked, what are the daily struggles faced by the farmer, trader, and prioritize these points against IFC strategic priorities.
• Match IFC products and services to the pain points
• Assemble the right people with the right execution plan, with deliverables and follow-up
• Use the pain point map to drive innovation for future solutions and map progress – integrated with the World Bank

In order to achieve these, the Committee proffered these approaches:

• Pick a few pain points, value chains and countries
• Focus on access to finance and access to markets
• Make sure solutions are scalable
• Be selective with partners, choosing the ones that care about SMEs in their value chains
• Marry expertise to what we can solve, making sure we have it in house or we can get it
• Speak the language of our partners: we care about SMEs, but also have to understand their pain points.

Georgina Baker (Director, Trade & Supply Chain), Usha Rao-Monari (Director, Sustainable Business Advisory), Jim Emery (Head, Manufacturing, Agriculture and Services), and Frank Sader (Head, Competitive Industries Unit in FPD) continued the discussion on the topic, sharing honest open opinions about departmental objectives and next steps.  Georgina agreed with the imperative to leverage joint capabilities across TSC, SBA, and MAS to provide alternatives to the challenges these SMEs face, particularly when it comes to standards that are too strong for issues like the color of produce, and not strong enough / well-enforced when it comes to production company building standards.While TSC facilitates access to markets through finance, shared Usha, SBA is trying to create access to markets for SMEs by creation a “loop” – SMEs on one end, aggregator on the other end.  The aggregator can play a vital facilitator role, similar to the “offtaker” in infrastructure, getting the chain to work, improve, and strengthen.In Jim’s opinion, IFC is not yet at the stage where we are organized enough to engage in the holistic, cross-silo approach at every stage of the value chain.  As an institution, we are reluctant to engage on big issues, like labor standards and child labor.  As we start to explore the more systemic issues for VCs, IFC and the World Bank need to work more closely.Frank shared that they are talking about the same issues – making more sense of the “World Bank Group machine”, to be more practical and focused.  Their program is a trust fund program, and one of their first criteria is evaluation criteria, asking how much the project opens up opportunities on the IFC side – and they expect those collaborate conversations to happen early on.Just Do It When asked about priorities for country and sector engagement, a common theme emerged – just do it.  TSC and MAS do everything jointly, and look for areas where they can gain traction.  From Usha’s perspective, the way to get initiatives started at IFC is to just get it going: see where IFC can help, start a project, and if it works – replicate it. According to Jim, opportunities exist down-market for VC creation in areas like the chemicals and automotive industries that are complex, largely decentralized, where policy is a priority and we are already involved in the sector, can bring expertise, have connections to major firms and a stake.  In the future, Frank shared, Africa will be a significant priority, and his team is looking into light manufacturing and agri-products.  His advice? Pick a country, see where the opportunity is, and go for it.

On 7-8 May I attended the MENA regional SME finance meeting co-sponsored by IFC and the Arab Monetary Fund, the theme of which was "Building a high performing SME business".  It gathered some 250 bankers and SME finance experts from the region and beyond.  Discussion themes included:

perspectives on strategic opportunities from bank CEOs and international experts,

innovations in risk management,

maximizing revenues through strategic customer risk management,

banking on women,

making a difference with SME Islamic banking,

new technologies for improving the SME banking value proposition, and

using non-financial SME services for competitive advantage.

All the presentations shortly will be available at the SME Finance Forum at www.smefinanceforum.org.  I learned many things at this meeting, but my biggest take-away was how much is possible for key SME products within Islamic finance structures...it's puzzling, given this, why we're not seeing more in this area from the growing number of Islamic financial institutions.  The link below from Israa Capital has a useful summary of how many products can be built on fundamental islamic finance structures...

matt

Small and medium sized enterprises (SMEs) will drive the recovery in Europe, but they need improved and easy access to finance. Over the last few years the European Commission has been constantly working to improve their situation. This commitment is reiterated in a joint European Commission/European Investment Bank (EIB) Group report published today. At a time when the situation remains difficult, the EIB Group's support for SMEs reached €13 billion in 2012.

attended a very interesting day-long seminar organized by the Gender and Development group from the World Bank yesterday.  Lots of interesting presentations and discussions...but what I'm taking away most, over and above all the extra barriers we see facing women entrepreneurs, is the tiny portion of women in waged employment in emerging markets, relative to men.  This is a real concern for many reasons, not the least of which because we see a relationship between waged employment experience and success in high-growth SMEs (whether women or men-run).  But it got me thinking - what about those countries where there have been booms in women's waged employment, such as all those manufacturing enterprises in southern China (Shenzhen and Guangdong), or in the garments sector in southeast Asia, Africa and central America?  Anecdotally, and through works like Leslie Chang's Factory Girls, we know that women work in these jobs for a while, and often move on to other things.  But what is the impact of this waged work experience on women's business development?  what are the potential implications for policy of having these sizeable (and often migrant) workforces getting skills training?  are we seeing more women breaking off to start businesses in these regions?  and what do we know about the performance of those businesses?  this pool of factory workers seems a valuable potential source of entrepreneurs...of course most will prefer to stay employees, but those that show initiative might be far better targets for support (finance and other) than those still staying behind in the villages...would be great to hear if anyone's working in this area, and has anything to share. matt

Washington, D.C., April 21, 2012—IFC, a member of the World Bank Group, will manage the Women’s Finance Hub, an initiative launched this week by the Group of 20’s Global Partnership on Financial Inclusion to improve access to financial services for women entrepreneurs and promote the sharing of knowledge and best practices. 

The hub is an online platform to help advance access to finance for women-owned businesses by disseminating research and information on critical issues related to the women’s market. It will also address gaps in data, promote collaboration in knowledge sharing, and highlight innovation and best practices in expanding women’s access to finance. 

The hub was launched during a ceremony at the 2013 Spring Meetings of the World Bank Group and IMF. Its creation was made possible with key support from several members of the Group of 20 advanced and developing economies—including the United States, South Korea, Turkey, Germany, and the United Kingdom—that have also consistently championed women’s access to finance issues in the G-20 financial inclusion agenda. 

“Women-owned enterprises represent significant untapped economic potential,” said Nena Stoiljkovic, IFC’s Vice President for Business Advisory Services. “It will take much more than credit to unlock that potential. It will also be necessary to expand financial literacy, leverage best practices, and put in place policies and regulations that remove barriers to women’s participation in the economy. The Women’s Finance Hub will provide an important boost to global efforts in these areas.” 

More than 200 million small businesses in emerging markets cannot obtain the credit they need to grow and generate much-needed jobs. The challenge is even more acute for women-owned businesses, which account for more than 30 percent of these firms. The financing needs of these enterprises reach about $320 billion a year. But credit is not the only barrier for these enterprises—they also need tools, know-how and networks. 

“We hope that this new collaborative platform will present opportunities for extensive synergies with IFC’s leading role in the development of the G-20 agenda for scaling up access to finance for women-owned SMEs,” said Matt Gamser, Head of the Women’s Finance Hub and the SME Finance Forum. 

The new Women’s Finance Hub is accessible at: www.womensfinancehub.org 

About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, our investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org. 

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