Accessing finance for an SME is vital to unlocking growth

Miguel da Silva | Managing Director | Retail Capital | mail me | 

The lack of access to finance is one of the main reasons small and medium enterprises (SMEs) fail worldwide. While start-up capital is crucial, access to funding in running a business is critical too.

In the best of times, access to finance is vital to scale and take advantage of opportunities. In times such as these, where there are green shoots and immense potential to rebound and rebuild after the pandemic, SME funding is imperative.

However, not enough entrepreneurs know that technology has made accessing funds for small businesses a lot easier, and they may not know where to look.

The conditions are just too onerous

Traditionally, small businesses would need to approach formal lending institutions such as banks for a business loan. The problem with this traditional approach to business funding is that the conditions are just too onerous for most SMEs.

Most often, if you own a business that has been operating for less than a year, the hoops you’d need to jump through and the collateral you’d have to put down to access a business loan is unpalatable. This is why the much-touted COVID-19 relief for small businesses hardly benefited a single SME under R10 million.

Fortunately, alternative lenders have disrupted traditional business funding models using technology. Now, access to business funding is more accessible to many, i.e. if a business has been operating for six months, it can access funding quickly and on terms that support SMEs and not stifle them.

Awareness

It starts with awareness. We have disbursed in excess of R4 billion to more than 38,000 SMEs. However, hundreds of thousands of businesses need working capital to purchase stock, expand their operations or take advantage of other opportunities such as e-commerce.

It’s important to inform business owners of the business funding opportunities that fintech has unlocked. Our revolutionary approach to SME finance ties the funding amount and repayments to business turnover – an approach that supports cash flow management and business growth.

When it comes to providing funding to SMEs, there are a few fundamental pillars, the most important being ease of access, speed of the process and very importantly, terms that are affordable, flexible and designed to enhance the business, not restrain it.

Supporting SMEs is about more than just funding. Beyond the process being fast and efficient, we take into consideration that business owners need additional support. We have a member portal where entrepreneurs can gain access to business information, tools and services (incl. marketing, social media, accounting, growth strategies, e-commerce support, and much more) to grow their businesses.

Entrepreneurs, especially those with early-phase businesses, should seek out lenders that do not demand security or collateral and are not prescriptive on the deployment of funds. In addition to this, he encourages entrepreneurs to do research and find lenders that offer flexible repayment terms that are affordable based on the performance of the business.

In conclusion

It is the start of a new year, and we are all longing to see a sustained period of recovery and growth. The President has presented his State of the Nation address and the finance minister will deliver his budget.

We expect both to pay some lip-service to the small business sector, but in truth, the short- and long-term prospects of the SME sector lie in our own hands.

My biggest piece of advice for entrepreneurs is to seek out reputable alternative SME funding providers and to build their network and join platforms to learn from the real-world experience of other businesses.