'Small firms need mentors'

Johannesburg - Small business owners face an increasing demand for short-term contract finance.

That is the view of Charmaine Groves, CEO of the Masisizane Fund - a small business funding initiative developed in conjunction with Old Mutual.

"The development finance space is daunting and has required Old Mutual to make a mindset shift," said Groves in an interview with Fin24.com.

She was responding to criticism of larger financial services groups for failing to support small business.

"What the banks need to remember is that the development finance customer of today could be a mainstream banking customer for them down the line," she cautioned.

Bookkeeping skills in short supply

Groves believed that mentorship of small business owners is a critical aspect that has not been adequately addressed in the local market.

"The Masisizane and Old Mutual competitive advantage is not money," said Groves, adding that Old Mutual had tapped into skills from former executives who were now on call to mentor the business owners.

These mentors give entrepreneurs a helping hand in hammering out a business plan, and help small business owners gain access to senior executives in the corporate world.

Asked which skills are in short supply among small business owners, Groves said many lack basic bookkeeping and financial knowledge, and are unable to develop and assess a business plan.

According to Groves, a real headache small business owners face at present is an inability to secure short-term contract financing from banks, which presents a gap in the market for financial services groups.

She said small businesses which engage with government or large corporates are often squeezed by cash flow constraints, which cripple the business before it gets off the ground.

"At the moment financial services businesses are not geared for contract financing; we need to find partners with industry specific skills who can make rapid assessment of a deal," she concluded.

- Fin24.com