Entrepreneurs not getting loans

Johannesburg - Entrepreneurs are finding it hard going to access funding.

"Available finance has generally declined since banks adjusted their qualifying criteria for loans," says Faisal Mkhize, Absa executive manager for small and micro enterprise financing.

The average size of a loan from this division is about R70 000.

Mkhize says the number of applications approved varies according to the product.

In the case of overdraft facilities between 22% and 30% of applications are turned down. The figure is 50% for term financing.

High-risk clients who do not qualify for loans, heads of businesses or businesses themselves with too much debt, judgments against applicants and reports of a poor payment history from a credit bureau number among the main reasons for not granting loans.

Mkhize reckons the country?s four main banking institutions serve about a million small enterprise owners.

He reckons the two-year survival rate for new businesses currently averages 66%, and over four years less than 50%. He suggests that entrepreneurs investigate other options, such as schemes offered by government departments or foreign institutions.

Larger concerns that have existed for more than a year could more easily be considered for funding.

Charles Wyeth, general manager of the Small Enterprise Development Agency (Seda), says the National Credit Act might be regarded as the only obstacle in an entrepreneur?s access to finance. But it is not the only headache. The many interest-rate hikes have added oil to the fire.

In Western Europe and the US much of the funding derives from the entrepreneurs themselves, their families or friends, but community support is not that common in South Africa.

Wyeth reflects that bank support has recently declined. Banks are extremely reluctant to lend to entrepreneurs.

- Sake24.com

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