Richard Whitfield
Rightly so, Macau government policies support the creation of new small and medium enterprises. Successful new businesses can create more jobs and wealth if they have an international focus, especially in a place as small as Macau. If you want to be your own boss and open a new restaurant, then set your sights on opening a chain of restaurants in Macau, the Pearl River Delta and beyond and not just one little local restaurant.
As one way of supporting new businesses the Macau government has the Young Entrepreneurs Aid Scheme, which is a good idea but which also has several problems as I outlined in an earlier article some time ago. The Scheme is for interest free loans, but each loan is limited to a maximum of MOP300,000 and requires a guarantor. In this way the government is acting very much like a conventional Asian bank, which usually require extensive guarantees before extending loans. The need for such guarantees is a major stumbling block for most aspiring young entrepreneurs because it puts the risk of the venture onto the guarantor, who is likely to be an older family member. Something that leads to more risk sharing with the capital provider would be better approach.
For many new small businesses the major need for funding is to buy operating equipment and, often to a lesser extent, stock. For example, a new restaurant needs kitchen equipment, air-conditioners, furniture and so on which must be purchased and set up before opening. It also needs wine and food, but the value of these raw materials is not so high, and they can quickly be transformed into sales.
In many parts of the world operating equipment can initially be rented to reduce capital expenditures and free up more money to purchase initial working stock. For example, in Australia new hospitality businesses can go to SilverChef (www.sliverchef.com.au) to negotiate a rental agreement for the equipment they need to buy. SilverChef then buys the equipment and rents it to the new business, and at the end of the rental agreement the business can choose to buy the equipment, or SilverChef keeps it for re-rental or sale. Similarly, if you buy computer or other electronic equipment from Dixons Electronics in the UK, a company called ThinkSmart (thinksmartworld.com) will give you trade finance so you can pay for it over 6-24 months.
Of course, using these financial arrangements increase the total cost of the equipment, but spreads the payment over a long period of time. This is often very beneficial for new businesses because it frees up initial capital for other uses. The rentor also shares in the risk of the new business by owning the equipment, and so has a strong interest in evaluating new customers and the viability of their business proposals. In Australia and elsewhere these kind of equipment rental/leasing arrangements are very popular with small businesses because of their risk sharing nature and the way that they spread capital investment over time.
This kind of equipment financing does not seem to be used much in Macau, but it can significantly ease the initial capital burden on new businesses. Maybe the Macau government could consider underwriting local banks or set up a new financial institution to provide these kinds of financial services to businesses as a way of helping local businesses to develop and diversify? Given the experience elsewhere I am sure that they would be very popular with budding local entrepreneurs.
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