How SMEs in Automation Can Grow with Financial Support

Automation workshops, particularly those in the Cluster, have an unconventional business cycle. They invoice all their projects for the previous year in one month and spend the rest of the year executing them. For small and medium-sized enterprises (SMEs) in this industry, having productive and technological capabilities is only the first step.

They also need to strengthen their administrative capacity to grow without jeopardizing their operation and to be subject to credit. However, commercial banks need to assimilate the way they operate and work more with promises or purchase intentions.

In Mexico, it is difficult for a client to accept payment of an invoice through a third party, also known as factoring. In contrast, in the United States, a line of credit can be obtained within 24 hours because they evaluate the multinational company that is the client. The banking system in Mexico scrutinizes financial statements and imposes high rediscount rates, which can cause SMEs to reflect these rates as part of the final cost in their quotations, depending on the payment term.

To overcome these challenges, financial institutions can provide proper support to automation workshops and other SMEs. This article will discuss how public and private financial institutions can help SMEs in the automation workshop industry with their financing needs.

What is an Automation Workshop?

An automation workshop is a business that designs and manufactures industrial automation systems. Automation systems are used to improve efficiency, reduce production costs, and increase productivity. These workshops offer various services, such as process design, system integration, custom programming, and technical support. Automation workshops are important for the industry because they help manufacturers to stay competitive by improving their production processes.

How Can Financial Institutions Help Automation Workshops?

Financial institutions can help with automation workshops in several ways. Firstly, they can provide financing solutions that meet the unique needs of the industry. For instance, Nafin, a development bank in Mexico, provides credit lines to SMEs in the manufacturing sector, including automation workshops. These credit lines have lower interest rates than commercial bank loans and offer flexible repayment terms.

Secondly, financial institutions can offer factoring services to SMEs. Factoring is a financial service that enables businesses to sell their invoices to a third party for a fee. This service can help SMEs to improve their cash flow and reduce their credit risk. However, in Mexico, factoring is not commonly used, and many clients are reluctant to accept payment through a third party.

Thirdly, financial institutions can provide technical assistance to SMEs to help them improve their financial management. Many SMEs in the automation workshop industry struggle with financial management, particularly accounting and financial reporting. Financial institutions can provide training and consulting services to help SMEs improve their financial performance and access credit.

Lastly, financial institutions can collaborate with other stakeholders to create a supportive ecosystem for SMEs. This includes working with industry associations, government agencies, and other financial institutions to create policies and programs that support SMEs. For instance, financial institutions can collaborate with industry associations to develop training programs that address the skills gap in the industry.

The Importance of Collaboration

By working together, public and private financial institutions can help to bridge the financing gap for SMEs and enable them to grow and contribute to economic growth.

• Collaboration can increase the availability of financing for SMEs: When public and private financial institutions work together, they can pool their resources and offer a wider range of financing products and services to SMEs. This can make it easier for SMEs to obtain the financing they need to grow their businesses.
• Collaboration can reduce the cost of financing for SMEs: When public and private financial institutions share the risk, they can often offer lower interest rates and other more favorable terms to SMEs. This can help SMEs to save money and to invest more in their businesses.
• Collaboration can improve the quality of financing for SMEs: When public and private financial institutions work together, they can offer a wider range of products and services to SMEs. This can help SMEs to improve their financial management and to develop their business plans.

Conclusion

In conclusion, financial institutions play a critical role in supporting SMEs in the automation workshop industry. They can provide financing solutions that meet the unique needs of the industry, offer factoring services to improve cash flow, provide technical assistance to improve financial management and collaborate with other stakeholders to create a supportive ecosystem. By doing so, financial institutions can help SMEs to grow and compete in the global market.