The United Nations Organization today welcomes the contribution of SMEs worldwide. Analysts in the country identify barriers in financing, planning and cash flows.
Small and medium enterprises (SMEs) in Ecuador are part of the largest and most important group, according to their number, of the country’s business network. They generate jobs and boost the economy.
Since 2017, the United Nations (UN) celebrates World SME Day every June 27, in honor of its work in global economies.
The latest data available from the National Institute of Statistics and Censuses (INEC) of 2017 indicate that there are 884,236 companies in Ecuador, of which 802,696 are microenterprises, 63,814 small businesses and 13,693 medium-sized enterprises A and B. Currently, their main problems are related to cash flow, financing and planning.
For the correct analysis of this sector, the president of the Young Entrepreneurs Association, Héctor Delgado, indicates that the concepts of entrepreneurship and SMEs must first be differentiated. “Businesses are businesses that work for up to three years. Nine out of 10 die due to lack of planning, financing and technology, “he said.
Once the enterprise exceeds that period of time, it presents a representative level of invoicing and generates more than five sources of formal jobs, it becomes an SME.
Even so, these are characterized by having a small number of workers and a moderate turnover of up to $ 100,000
Delgado explained that at the moment small and medium enterprises in the country “subsist”, that is, neither grow nor die. “This is quite good given the reality of the Ecuadorian economy, which is quite complicated,” he said.
One of its main problems, which even leads to the bankruptcy of companies, is the lack of liquidity to cover administrative and operational expenses.
One of the causes is the late payments of large companies. These usually cancel their bills, small, between 70 and 90 days after having made the purchase.
Financing is another obstacle for small and medium enterprises, despite the efforts of public banks. “We must improve the agility in the processes,” said Delgado. Pablo Patiño, general manager of the Corporación Financiera Nacional (CFN), said that this productive segment is dedicated to trade and manufacturing. For this reason it is important that they have the financing “to leverage their growth”.
In that sense, the official said that two problems arise: high interest rates and the lack of proof of ability to pay. For the first case, the CFN has lowered the rate to 8.95%. “This has made viable the projects they present and allows them to have enough cash flow that helps them grow,” he said.
On the other hand, SMEs must demonstrate their ability to pay and formality in managing their finances. “Many of them do not have that ingredient,” he said.
Another factor that has affected SMEs is the end of the commodity cycle, added José Luis Castillo, a research professor at the Faculty of Humanistic Social Sciences of the Polytechnic School of the Littoral (Espol).
In the past, this sector maintained an important income of resources in the country, but now SMEs are subject to the “sway” of international trade and the productivity of other countries. “It is cheaper to import because the other countries have economies of scale with other productive capacities,” he said.
Additionally, according to the academic, the high production costs also complicate the survival of companies. “In addition, the size of internal sales that can generate is very small.”
For a better management of small and medium businesses, Delgado recommends keeping accounting records so they are not obligated, have a financial planning, join a camera or guild and attend networking events.