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POOR debtors' control in addition to access to finance are the top problem areas for small business owners, says a Fin24 user. He was responding to an article SureSwipe MD: Laws kill small businesses.
He writes:
Banks have to follow the laws which have been promulgated by the parliament of SA.
A high number of businesses fail within the first couple of years of operation (estimates are closer to 80%).
So, it is contradictory for the writer to expect shareholders (those who own banks) to invest in a company that is lending in an environment with such a high failure rate (ask African Bank how they are holding up. While you are at it, ask Capitec too).
Access to finance is indeed one of the top two problems encountered by small business owners. The other is access to markets. In fact, even those who make it struggle with cash flows as a result of bank management or poor debtors' control.
Part of the poor debtors' control is as a result of large corporations and government taking their sweet time in paying for services. Some take up to three months to pay verified invoices, pushing many small business owners to the brink.
Labour law compliance and many other compliance issues are the main reason small businesses fail. A business owner can ill afford to spend time at the CCMA to fight a frivolous dismissal case, and yet they are often required to and postponement after postponement means they are not in their jobs to take care of business.
It is true that many small business owners have no management training, but worse is the lack of financial training and understanding.
So, if you combine government compliance, delay in receiving money for services rendered, poor financial management skills and lack of security the high failure rate can be attributed as the main reason why small businesses fail, not because banks fail to lend to them.
I deal with small business owners on a regular basis and it is heart-breaking to see the most dedicated person losing out because they lack security or do not have own contribution and yes, denying some businesses the money they need to stay afloat is what dooms them.
However, should the bank fail to cross all the t's and dot the i's, then government agencies have no problem in finding the bank guilty.
Ask yourself what sank the property financing market in the country, forcing banks to demand deposits. Well, mortgage originators found a space in the market. They took one application and they sent to all four banks, for a small commission.
The three banks incurred costs in the process and did not get the business. Yet, all were giving 100% and sometimes 103% loans and valuations were very liberal.
We got into what was called a bubble and property financing has never recovered in SA. It is recovering in the US. Many a smart small business owner will send four applications to all the banks and demand service.
Unfortunately, for business applications the client needs to be more involved in the process and the decision is not based on the hypothetical, but on reality which means the time wasted is costly to all parties involved. Yet some clients still do this, ie shopping the application.
In essence, they are increasing the cost of banking for other genuine small businesses but also making banks reluctant to deal with a certain category of clients. The government needs to take the lead by removing the compliance obstacles and even offer more facilities like Khula, which are however not tied down by red tape and incompetence.
Even then, these facilities are expensive and perhaps government would be better served offering discounted interest to small business owners who employ a certain number of people. The more they employ, the lower the interest rates or tax breaks.
I am an employee of a bank, but am neither a shareholder nor a senior employee. I work in the small business environment and I failed in starting a business of my own. I think we need to be fair in apportioning blame and while the banks cannot run away from the blame game completely, government should take the major part of it.
While I am a fan of some of our labour laws, they should be applied sparingly for small business owners or there should be another flexible forum to address complaints from wrongfully fired employees.
One employee can actually ruin it for many others.
- Fin24
Something on your mind? Share your experience and you could get published.
He writes:
Banks have to follow the laws which have been promulgated by the parliament of SA.
A high number of businesses fail within the first couple of years of operation (estimates are closer to 80%).
So, it is contradictory for the writer to expect shareholders (those who own banks) to invest in a company that is lending in an environment with such a high failure rate (ask African Bank how they are holding up. While you are at it, ask Capitec too).
Access to finance is indeed one of the top two problems encountered by small business owners. The other is access to markets. In fact, even those who make it struggle with cash flows as a result of bank management or poor debtors' control.
Part of the poor debtors' control is as a result of large corporations and government taking their sweet time in paying for services. Some take up to three months to pay verified invoices, pushing many small business owners to the brink.
Labour law compliance and many other compliance issues are the main reason small businesses fail. A business owner can ill afford to spend time at the CCMA to fight a frivolous dismissal case, and yet they are often required to and postponement after postponement means they are not in their jobs to take care of business.
It is true that many small business owners have no management training, but worse is the lack of financial training and understanding.
So, if you combine government compliance, delay in receiving money for services rendered, poor financial management skills and lack of security the high failure rate can be attributed as the main reason why small businesses fail, not because banks fail to lend to them.
I deal with small business owners on a regular basis and it is heart-breaking to see the most dedicated person losing out because they lack security or do not have own contribution and yes, denying some businesses the money they need to stay afloat is what dooms them.
However, should the bank fail to cross all the t's and dot the i's, then government agencies have no problem in finding the bank guilty.
Ask yourself what sank the property financing market in the country, forcing banks to demand deposits. Well, mortgage originators found a space in the market. They took one application and they sent to all four banks, for a small commission.
The three banks incurred costs in the process and did not get the business. Yet, all were giving 100% and sometimes 103% loans and valuations were very liberal.
We got into what was called a bubble and property financing has never recovered in SA. It is recovering in the US. Many a smart small business owner will send four applications to all the banks and demand service.
Unfortunately, for business applications the client needs to be more involved in the process and the decision is not based on the hypothetical, but on reality which means the time wasted is costly to all parties involved. Yet some clients still do this, ie shopping the application.
In essence, they are increasing the cost of banking for other genuine small businesses but also making banks reluctant to deal with a certain category of clients. The government needs to take the lead by removing the compliance obstacles and even offer more facilities like Khula, which are however not tied down by red tape and incompetence.
Even then, these facilities are expensive and perhaps government would be better served offering discounted interest to small business owners who employ a certain number of people. The more they employ, the lower the interest rates or tax breaks.
I am an employee of a bank, but am neither a shareholder nor a senior employee. I work in the small business environment and I failed in starting a business of my own. I think we need to be fair in apportioning blame and while the banks cannot run away from the blame game completely, government should take the major part of it.
While I am a fan of some of our labour laws, they should be applied sparingly for small business owners or there should be another flexible forum to address complaints from wrongfully fired employees.
One employee can actually ruin it for many others.
- Fin24
Something on your mind? Share your experience and you could get published.
