The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Ninety per cent of Bahamian small and medium-sized businesses will likely miss out on the financing opportunities offered by BISX’s proposed commercial paper market due to “indiscipline”, a leading consultant warned yesterday.

Mark Turnquest, of Mark A. Turnquest Consulting, told Tribune Business that the failure of many companies to keep proper accounting records, or have a “stable business model”, meant few would be attractive to commercial paper investors.

Praising the Bahamas International Securities Exchange’s (BISX) proposed short-term corporate finance platform as ‘a really creative, innovative approach”, Mr Turnquest said there were likely to be few qualifying issuers.

“The only problem is that 90 per cent of small and medium-sized businesses do not keep good accounting records, as they are not disciplined,” the small business adviser told Tribune Business.

“That is going to be one of the shortfalls. That is one of the major problems. This opportunity might forego a lot of small and medium-sized businesses because the consistency of accounting records is not in place.”

Without any trustworthy indication of a business’s profits and cash flow, investors are unlikely to buy its issued commercial paper because they will be unsure of whether their investment will be repaid.

BISX has been eyeing the creation of a commercial paper market as an alternative - and cheaper - source of short-term financing than commercial banks.

It is akin to trade financing - a mechanism for Bahamian companies to issue short-term debt securities to buyers as a way of overcoming temporary cash flow issues.

Effectively, BISX would be facilitating an alternative to bank overdrafts, bridging loans and letters of credit (LOC) for creditworthy companies, who could demonstrate that they had assets and incoming cash flow to repay their financiers.

But Mr Turnquest added: “Another major problem is that small businesses do not follow a lot of consistent procedures in how they do business.

“The business model is not how it’s supposed to be, and opportunity is going to pass them by because they’re not committed to actually having consistent accounting and other record keeping procedures.

“Their business model is not consistent. They do it one way this month, another way the next month. There has to be a series of consistent accounting procedures.”

Mr Turnquest said this also explained why commercial banks and other established lenders were so reluctant to lend to Bahamian small businesses, “as they don’t know how to consistently do business the right way”.

“You can’t blame the financial markets; you have to lay it on ourselves; the small businessman. They have to be lot more proactive and a lot more sincere, as a lot of them are not doing business the right way,” he added.

While Bahamian entrepreneurs were now more optimistic than they had been in 2012, Mr Turnquest said this had yet to translate into increased sales.

“It’s a little better than last year,” he added. “My clients in business, they are more optimistic mentally,” he added. “However, sales have not increased tremendously. They are in a better state mentally than last year, but one or two of my clients are not breaking even.”

Mr Turnquest told Tribune Business that his own consulting business had to be “so creative to save” itself, packaging services and employing innovative marketing strategies.

“Things are just stale, and there’s nothing glamorous going on,” he said. “There are no signs of economic growth. Based on my clientele, there’s no growth.”