Johannesburg - Over the last few weeks, Fin24.com's Money Clinic has been inundated with requests from small business owners who say they are facing increasing cash-flow pressures.
Fin24.com has asked the experts for advice on a few of the problems facing small businesses.
The fallout in global financial markets has forced many lending organisations to reconsider their policies when it comes to personal and business lending.
Despite a number of people (including Finance Minister Trevor Manuel) saying that South Africa will not slip into recession, there appears to be increasing pressure on new and established businesses operating in the small- to medium-sized enterprise (SME) sectors.
One reader said: "I started my business with an excellent marketing plan. However, I had no capital to invest further other than to purchase minor capex and the refurbishment of the business premises. My debtors' book is 30 days and I am running out of working capital very quickly, but do not have the credentials to apply for a overdraft or bank loan. Where else can I get access to capital?"
Another user runs a retail business which has been in existence for 12 years. With the slowdown in consumer spending, the owner is uncertain where to access additional working capital to keep going through these challenging times.
Help is at hand
Jannie Rossouw, a senior business manager at Sanlam Cobalt, says that the first place you should go and seek capital from is your primary bank where you hold your business accounts.
He says: "If you have a good credit record with these institutions, you are most likely to get the best terms from them."
Rossouw said that institutions such as Business Partners and Sanlam Cobalt would be able to assist with providing funds for working capital, black economic empowerment transactions and business and franchise acquisition transactions.
When seeking working capital, you will be expected to produce a variety of documents. These will include a business plan of the product or service you are planning to offer. You will also need to outline your practical experience in terms of running the business.
The financing institution will also need to get an understanding of how your business operates from a cash-flow perspective. For this reason, they will need copies of your previous trading years financial statements, projected cash flow of your business over the next 12 months and management accounts no older than three months.
Get credit savvy
Some Fin24.com My Business readers have complained that despite reading that banks are offering credit, the reality is somewhat different when they actually apply for loans.
We raised this issue with some of our business experts. They indicated that a key area where applicants fail is in the area of their "financial intelligence". According to them, many people apply for financing with very little in the way of audited financial statements, record keeping or the ability to generate realistic cash flow forecasts.
As a result, they are often disappointed when they apply for financing.
Amrei Botha, head of SME propositions for Standard Bank, says that a higher level of financial intelligence can assist businesses in getting loan approval.
Give us your feedback
There seems to be little doubt that capital pressures are starting to hit the small business sector in South Africa. In a recent business survey small business owners said that petrol was the single biggest pressure they felt.
Do you believe that the lack of access to credit is now the biggest threat to your SME? Let us know what you think.
- Fin24.com