SMEs hard-pressed over funding challenges


In most economies, small businesses contribute toward a more equitable growth and job creation, however South African Small and medium enterprises (SMEs) have been facing challenges with accessing loans.

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“The environment is different as there is rising interest rates, rising municipal rates and also rising electricity rates which is compounding the expenses that small businesses have to deal with,” Simone Cooper, head of franchising and enterprise development at Standard Bank told CNBC Africa.


“The costs for a small businesses are increasingly getting worse, therefore In terms of funding there is so much that a small business can term.”

Cooper added that there were fewer businesses with more headroom to afford loans unlike five years ago adding that good businesses were still able to remain profitable and cut costs in different ways.

“There are some businesses that have done really very well over the past five years and have been able to continue accessing greater funding while some businesses have struggled,” she noted.

Cooper said that the success and profitability of businesses depends on how they have managed to keep their businesses afloat, getting into new markets and innovating.

The franchising expert also noted that the some businesses in franchising space had managed to survive due to intervention of ‘big brother’.

“The advantage of franchises is that businesses have ‘a big brother’ who is able to provide with guidance through these tough times as a group,” said Cooper.

“As a franchisor they might have plans around training and development, new markets, helping franchise businesses to get into new spaces and also assist with buying power. As a result we have seen franchise business weathering the storms.”

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She said that banks were looking at how they get repaid hence they look at an individual’s cash projections, income statements and past performance.

Cooper noted that there are more innovative business funding models that are coming into the market noting that banks are among other institutions exploring contract funding which is a cash flow funding mechanism.