How to ‘shop’ for the right business finance
Choosing the right business finance these days can be a lot like sitting down to a buffet and trying to decide between all that is on offer. There are more and more options out there, between the banks or other traditional lenders, and nowadays with more alternative lenders, it is difficult to know who to go to for the best business funding.
SME business finance in South Africa has evolved over the years. Not only has there been substantial growth in the number of B2B alternative lenders in the South African marketplace, but there has also been growth in the type, and diversity, of products offered. Many business owners are not aware of alternative lenders, which range between 40 to 50 in South Africa. Gone are the days where the only options are an overdraft facility or credit card from your bank.
SME business loans vary substantially and include product types such as term loans, secured or unsecured loans, invoice discounting, factoring, purchase order finance, merchant cash advances, asset finance, asset rentals, line of credit, trade finance etc.
To further complicate matters each one of these products differs in terms of structure of loan terms, interest rates, fees, security, collateral, facilities, advances, deposits and residuals. The product chosen also has a direct impact on cash flow, profit and loss as well as income tax and balance sheet strength.
With all these challenges, it makes it difficult to find the right lender and product type, and to compare and decide on the best product to suit your business needs. It requires skill and knowledge to assess ideal products for specific purposes. Apart from Google searches, how do you find alternative lenders, and once you have found them how do you know if they are reputable and how to you compare like for like? After all, you’re not only looking for the right product. As a business owner, you’re also looking for a lender who offers great customer service and moves at the speed of your business. The problem with many lenders, alternative or not, is that the application process is time consuming and the assessment takes even longer. This is where the likes of Lulalend stands out among the competition: with an easy application process, a turnaround time of 24 hours, and a product offering where funding can be used for an array of business purposes.
When shopping for business loans, it is important to consult with a trusted and experienced advisor such as your broker, accountant or auditor. Don’t rush into a decision which you could regret, rather spend time with the experts that can help you make the right decision accurately. In addition, there are independent portals, such as FundingHub that offer a service to help you match your needs to most of the reputable lenders. They have independent experts that can coach and guide business owners, and help them find lenders that they never knew existed and offer the right product for their needs.
Guest blogger: Barry Leonard
Barry is a Chartered Accountant and has been the CEO of an SME company for 13 years. He is passionate about technology in financial services and through FundingHub wants to make it easy for the SME to find funding.