'The competition is not external but internal'
Puneet Chaddha, head commercial banking - India, HSBC, gives ET a candid assessment of the challenges facing SMEs when it comes to international markets.
By TNN |
It's never easy for small businesses to compete in the global market-place. Puneet Chaddha, head commercial banking - India, HSBC, gives ET a candid assessment of the challenges facing SMEs when it comes to international markets.
How according to you, has the situation changed for the SME in International Trade?
A key trend is the level of competition in International Trade for the SME's. This competition is not only from SME's from other countries but also from others in India. This has resulted in falling margins and increased demands from buyer clients. There are demanding expectations in terms of pricing, quality and time adherence. However the Indian SMEs are quite ready for the challenge in this ultra competitive scenario and have an extremely positive outlook about the future.
What trends have you noticed in SME International Trade?
How according to you, has the situation changed for the SME in International Trade?
A key trend is the level of competition in International Trade for the SME's. This competition is not only from SME's from other countries but also from others in India. This has resulted in falling margins and increased demands from buyer clients. There are demanding expectations in terms of pricing, quality and time adherence. However the Indian SMEs are quite ready for the challenge in this ultra competitive scenario and have an extremely positive outlook about the future.
What trends have you noticed in SME International Trade?
| Puneet Chaddha |
There is a very visible trend in International Trade of going away from LC's (Letters of Credit) to open account as regards the financial structuring of trade. The importer is not willing to bear the cost of the LC which is demanded by the Indian exporter. This might even be the case with an established relationship developed over years.
The Indian SME is therefore forced to do the sale with increased risk involved. Factoring Services, which gives finances against the export invoices generated is a very suitable product in this scenario. Firstly it provides finance which meets the working capital needs. The follow-up for payment is done by HSBC and this can be combined with Insurance which protects the exporter against buyer default.
What does HSBC offer to SME's in International Trade?
In the ultra competitive International Trade scenario, SME's need to by force increase the volume of business as well as roster of clients. In this context, the SME needs to be competitive in terms of speed as well as quality. We have a six sigma process by which we commit to a 24 hour turnaround time on Export / Import documents and Remittances. Our specialized Trade Advisory centre gives guidance to the SME's on structuring the trade transaction. We also have specialized products like LC Confirmation which would protect the SME incase he is looking at doing business with new countries.
Our international network across 83 countries gives us deep rooted knowledge about local customs and processes which helps us guide the SME's in their trade. Banking with HSBC is especially beneficial if the SME's client on the other hand is also a HSBC customer. In this case there is a saving of valuable time as the Trade documents are checked only once across the HSBC group network.
Our Foreign Exchange Services offer various hedging options to the SME's to protect them against foreign exchange volatility. Factoring services which provides finance against invoices is a very useful product for an SME doing open account trade.
The offering for each SME would be advised after a thorough study of the business in terms of industry, countries exported, financial structuring of the trade and the size of business.
Do you have something specific to offer to SME's doing Trade with US?
In addition to the Export Factoring, Forfeiting and LC Confirmation services described above, we have a special program called Trade Advance structured for suppliers to large US buyers like Nike, Gap, JC Penney, Home Depot, Wal-Mart, etc.
The suppliers can get trade finance through a preferential simplified credit evaluation route which has potential cost savings as well as increased business from the principal.
The Indian SME is therefore forced to do the sale with increased risk involved. Factoring Services, which gives finances against the export invoices generated is a very suitable product in this scenario. Firstly it provides finance which meets the working capital needs. The follow-up for payment is done by HSBC and this can be combined with Insurance which protects the exporter against buyer default.
What does HSBC offer to SME's in International Trade?
In the ultra competitive International Trade scenario, SME's need to by force increase the volume of business as well as roster of clients. In this context, the SME needs to be competitive in terms of speed as well as quality. We have a six sigma process by which we commit to a 24 hour turnaround time on Export / Import documents and Remittances. Our specialized Trade Advisory centre gives guidance to the SME's on structuring the trade transaction. We also have specialized products like LC Confirmation which would protect the SME incase he is looking at doing business with new countries.
Our international network across 83 countries gives us deep rooted knowledge about local customs and processes which helps us guide the SME's in their trade. Banking with HSBC is especially beneficial if the SME's client on the other hand is also a HSBC customer. In this case there is a saving of valuable time as the Trade documents are checked only once across the HSBC group network.
Our Foreign Exchange Services offer various hedging options to the SME's to protect them against foreign exchange volatility. Factoring services which provides finance against invoices is a very useful product for an SME doing open account trade.
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The offering for each SME would be advised after a thorough study of the business in terms of industry, countries exported, financial structuring of the trade and the size of business.
Do you have something specific to offer to SME's doing Trade with US?
In addition to the Export Factoring, Forfeiting and LC Confirmation services described above, we have a special program called Trade Advance structured for suppliers to large US buyers like Nike, Gap, JC Penney, Home Depot, Wal-Mart, etc.
The suppliers can get trade finance through a preferential simplified credit evaluation route which has potential cost savings as well as increased business from the principal.
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