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Johannesburg - The idea of absolving small business owners of personal liability for the funding they receive from financial institutions is fundamentally flawed.
This is the view of leading small business mentor Allon Raiz. Asked whether banks should reduce their personal surety requirements to encourage enterprise growth, he said: "I completely disagree with the idea of decoupling it.
"My view is that the risk has to be commensurate and if entrepreneurs want to participate in the upside, they need to take the risks as well."
Fin24.com recently polled South African entrepreneurs on the relationship between financial institutions and the small business sector.
Technology entrepreneur Vinny Lingham suggested banks should reduce the collateral or personal surety they require to provide finance.
But Raiz said this is wrong.
Wrong message
"Too many entrepreneurs want to enjoy the benefits of a successful business but aren't prepared to take the personal risks - it is too easy to accept failure with other people's money," Raiz said.
Raiz said the amount of capital a small business owner is prepared to invest is a test of the entrepreneur's commitment.
"It took me over five year to become profitable; there was no plan B and no back-up," said Raiz.
Raiz said the perception that there should be a pool of money available to anyone who wishes to start a business is wrong.
There is no "just add-water recipe" to stimulate the small business sector, he said. The availability of money alone will not promote small business development.
Raiz said financial institutions first of all look for experience, as entrepreneurs with strong professional networks and experience are more likely to establish sustainable businesses.
- Fin24.com
