Five ways SMEs can make themselves more funding-ready

Access to finance remains one of the biggest obstacles facing small and medium enterprises (SMEs) in South Africa. However, a lack of available capital is not the only reason for this challenge; in many cases, a lender can only assess what it can see. Businesses that do not have a clear, consistent financial footprint may therefore find it more difficult to access the funding they need.

Louise Roux, product head: SME lending at FNB, says limited financial information, inconsistent banking activity and poor record-keeping can make even a healthy business difficult for a bank or credit provider to assess. “Lending has become increasingly data-driven, making the quality and consistency of a business’s financial footprint just as important as its funding need. “Businesses that build this visibility are often able to access funding faster, secure solutions that are better suited to their needs, and create a stronger foundation for sustainable growth.” Roux says funding preparation should not begin only when a business has run out of cash or a growth opportunity arises.

Business owners should keep key financial information updated throughout the year, including monthly sales, major expenses, existing debt obligations and expected cash flow. “Funding readiness should be treated as a discipline, not a once-off event. The easier it is for a lender to understand how the business makes money and manages its obligations, the easier it becomes to make an informed funding decision.” She adds that mixing personal and business transactions makes it harder to determine a company’s true financial position.

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Roux says modern lending decisions increasingly draw on the data a business creates through its everyday activities. Banking transactions, card payments, invoices, accounting records, supplier payments and marketplace sales all help demonstrate that a business is active and generating revenue.

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