According to a report by McKinsey, “SMEs make up about 98.5 percent of all businesses in South Africa and are a critical force in the country’s economy, yet historically they have struggled to access the capital they need to grow.”
BizFunding offers an easier, more straightforward approach – an innovative profit-sharing model for funding business growth. If a company has what it takes to secure a significant project or tender, BizFunding can provide the working capital to fulfil it.
Accessing finance: a challenge for most SMEs
An article by the Organisation for Economic Co-operation and Development (OECD) notes that while SMEs contribute about 40% of South Africa’s GDP, they account for only 25% of business bank loans.
According to the OECD, there are a number of reasons for this low access to finance for small enterprises, including:
- very few suitable formal finance products
- limited available credit information
- perceived riskiness of small enterprise finance
- lack of financial knowledge
- apparent lack of appropriate assets available for collateral.
Limitations of traditional funding avenues
SMEs face numerous constraints in accessing traditional finance. For a start, traditional business lenders, such as commercial banks, are risk-averse. They direct their lending to larger, more established companies.
When SMEs do apply to banks for business funding, they make it difficult for start-ups to get approved. Funding application processes are often difficult or impossible for small or newer businesses to complete. Banks require several years of financial records and proof of a significant, established turnover.
In theory, government funding is an option for SMEs. In practice, only 6% of South African SMEs receive government funding and only 9% have access to funding from private sources, according to a McKinsey report.
While venture capital and private equity are alternative sources of funding for SMEs, figures show that around 90% of private equity funding goes to businesses older than five years.
The reality is that formal lenders, like banks, have reached the point where their relationship to SMEs is almost adversarial – and neither party expects to “win”.
Why profit-sharing makes sense
This lack of access to traditional finance is a major constraint for SMEs and is hindering growth. This is why profit-sharing makes sense.
Profit-sharing is a collaborative approach where the lender and SME work together to support mutually beneficial growth.
The main advantage is a practical one. SMEs don’t have to worry about repaying borrowed funds until their work has been paid for.
How BizFunding can partner with your business
If your SME has secured a significant tender or purchase order, you can use it to secure working capital from BizFunding. This makes it possible for you to pay suppliers and complete the order.
We don’t charge monthly interest or fees, so you don’t have to worry about repaying costly debt. Instead, we partner with your business, agreeing to share profits. This innovative profit-sharing model means you only pay us back when your business is paid.
The tender or purchase order has to be confirmed, and the business must have the necessary core abilities in place to fulfil the order to the buyer’s satisfaction. Our profit-sharing model makes it possible for SMEs to compete with larger, cash-rich businesses – without having large capital reserves.
How BizFunding can partner with your business
If your business has secured a tender or purchase order, BizFunding can partner with you using our profit-sharing model to provide working capital. Apply in minutes and receive a same-day proposal.
For more information, call us on 012 001 0095 or go ahead and apply online now.
