What is Business bridging finance in South Africa?
Business bridging finance, or a bridge loan, is a short-term loan that is typically taken out for a period of 2 weeks up to 12 months. This type of funding allows businesses more flexibility to take advantage of new opportunities when business is slow.
Business bridging finance is ideal for when operational costs such as salaries, running costs, and other organisational costs need to be continually met in order to produce a product or a service.
How does business bridging finance work in South Africa?
Each different financial institution will offer its own version of bridging finance. The amount of funding you receive, and how long you will take to pay it back, will determine the exact nature of your funding offer and the costs associated with it.
Before you receive funding, the financial institution will need proof that your business will be receiving sufficient income over the period of the loan. You can provide proof in the form of contracts, invoices sent out, or purchase orders.
Where most traditional financial institutions have restrictions on what you can spend your bridging finance on, alternative lenders, such as Lulalend, offer unrestricted bridging finance. This allows you to spend the funds on any expense associated with your business.
The Benefits of Business Bridging Finance
For many businesses, customers failing to pay on time are a common problem. This puts a business under severe financial strain and affects the ability to buy new inventory, or pay employees’ salaries, amongst a number of other challenges. Bridging finance allows your business to grow effectively without worrying about delayed cash inflows.
Here are some practical benefits of business bridging finance:
- Funds are made available to you much faster than traditional lenders such as banks
- Flexible payment options
- Being short term in nature, funds can often be approved faster – especially via alternative lenders such as Lulalend
- Allows your business to continue making a profit through sales while meeting day to day operational costs
- Aids business growth by allowing expansion plans that require significant investment to continue, as other day-to-day costs can still be met
Related: 3 Ways Bridging Finance Instantly Improves Cash Flow for Your Business
Who offers bridge loans?
Traditional banks, alternative financial institutions, and government funders offer bridging loans.
Lulalend’s funding specialists advise customers to be wary of unscrupulous lenders. It is important to only take out loans from reputable companies that only offer you loan amounts you are able to repay. As much as being approved for larger amounts, or being offered a loan even if you are blacklisted, may be tempting, often the repayment costs will harm your business.
Do banks offer bridging finance?
In South Africa, most banks provide bridging finance to business owners so they can cover cash flow shortfalls. However, it’s important to remember that traditional banks require collateral or restrict the use of the finance you’ve taken out, for example; It must be used to pay suppliers directly.
How much interest do you pay on bridging finance?
The interest associated with bridging finance will depend on the funder you choose, the total amount of your loan, and the period you take the loan for.
Where a lender might offer you a lower interest rate of 1% or up to 4%, it is important to note that this interest is calculated per day. So for example:
|Total Loan Amount
|Interest Amount Per Day
|Total Interest Cost every 30 Days
Lulalend will charge fixed monthly costs of 2% – 6% of the capital amount for bridging loans. The exact costs will vary from customer to customer. Unlike most lenders, Lulalend does not charge penalty fees on early repayments. This is something one should take close note of when going through a lender’s policy on repayments.
How long does it take to get a bridge loan?
Each lender has its own disbursement terms and how long it will take will depend on the amount of the loan and the type of loan you need.
At Lulalend, we disburse funds to successful applicants within 24 hours.
Related: Business Funding: An overview of how SMEs can access funding in SA
Are bridge loans a good idea?
Many SMEs admit that having inadequate cash flow is a problem that arises often. Bridging finance is a way to help ease the ups and downs of managing a business and its access to funds.
A bridge loan is a great solution for businesses that need access to funds quickly in order to take advantage of new opportunities that will enable them to grow or to pay one-off or unexpected costs.
Why choose Lulalend?
Lulalend offers bridging finance that is unsecured, more affordable than traditional banks, and easily accessible within 24 hours. Plus, there are no penalty fees for early settlement.
Related: What is a business credit facility?
Lulalend and Business Bridging Finance
We understand that different businesses have different needs, which means their financing requirements will differ too.
Our business bridging finance offer is unsecured (no collateral required), more affordable, and easily accessible. We also allow you to settle early without having to worry about penalty fees. With Lulalend’s quick and easy online application, you can access business funding of up to R1,5 million within 24 hours. Our application is completely paperless, requires no collateral, and you’ll have an answer in hours.
If you’re looking for funding for your business, read more about Lulalend’s business funding options here.
On Thursday, 17 September 2020, Governor Lesetja Kganyago read the latest Monetary Policy Committee (MPC) statement. We are happy to see that the South African Reserve Bank (SARB) held it’s key lending, or repo, rate at 3,5%. A low repo rate is good news for both consumer spending levels and for businesses looking to borrow money to invest in growth opportunities.
However, on a more cautionary note the SARB also revised its 2020 GDP forecast downwards, indicating a contraction of 8.2% for the year compared to its early prediction of a 7.3% decrease. This revised forecast is now more in line with other external organisations such the OECD. According to the Dailymaverick.co.za, “The Organisation for Economic Cooperation and Development (OECD) forecasts an 11.5% contraction for the South African economy in 2020, the biggest among 19 countries surveyed in Africa. A GDP contraction indicates a potential decline in industrial production and retail sales, and could lead a drop in real personal income.
Related: Tips for the 2020/2021 tax season
The SARB also indicated that inflation is set to remain within it’s target range off 3% to 6%. The Monetary Policy Committee statement said, “The central bank’s headline consumer price inflation forecast averages 3.3% in 2020 and is lower than previously forecast at 4% in 2021 and at 4.4% in 2022.”
During the MPC meeting, it was also brought to light that the inflation rate “is expected to be well contained over the medium-term,” due to the slow recovery and economic contraction.
This suggests that the SARB has the ability to reduce rates even further but the statement was clear in the fact that the bank’s “Quarterly Projection Model (QPM) indicates no further repo rate cuts in the near term and two rate increases in the third and fourth quarters of 2021.”
Related: What We Learned At The Business Show South Africa
With the country moving to Level 1 in a few days, the hope is that the further increase in commercial activity will help grow the overall economy and put money back in consumers pockets.
With the record low repo rate set to remain at this level for the foreseeable future, and inflation also expected to remain steady, now is a good time for business owners to look at accessing additional capital to invest in the future of their business.
Lulalend’s funding options are flexible and personalized for your business needs. Find out more about our bridging finances and credit facility offers today.
Guest blog by PayFast
There’s never been a more appropriate time to get your business online. The COVID-19 pandemic and the government’s response of enforcing different levels of lockdown regulations have affected the economy hard. As a business owner, you know this first hand. While restrictions are slowly being lifted to get our economy up and running again, one thing is clear: social distancing is here to stay for the foreseeable future. If your business is brick and mortar then it’s essential that you fast track your strategy of getting your business online, because even if you are allowed to open your doors again you will have far less foot traffic than what you were used to pre-COVID-19, and you will have to limit the number of customers in your store at any given time.
Whether you’ve been thinking about going online but haven’t gotten round to it yet, or if it’s a brand new concept to you, we want to help. We’ve put together the following three-point plan to help you successfully move your business online as quickly as possible.
1. Do your Research
Before moving your business online it’s important to do extensive research to ensure you aren’t caught off guard and have a good understanding of the costs involved in running and maintaining an online store. This includes doing a bit of research into the price of your products, shipping options, and what ecommerce platform is best suited for your business.
Doing your research can be further broken down into the following main points:
Know your product(s)
This means knowing absolutely EVERYTHING about it, from who is manufacturing or supplying it, whether there will be import duties and if you can handle the demand for it. When you have these facts locked down you’ll be able to more effectively establish important things like branding, pricing, shipping, and marketing.
It’s also important to have a good understanding of who your intended customer base is so that you can cater to their online shopping needs and adequately market to them.
Know your competitors
The best way to learn about what works and doesn’t is by looking at what your competitors (both local and international) are doing on their online store. Pay special attention to their website layout, how user friendly it is to navigate, the image quality of their products, the different product categories, and subcategories, and of course pricing.
Work out pricing and shipping
This is one of the most important things that will determine the success of your online business. You must take into account the manufacturing or purchasing and import costs so that you sell your products for a fair price while making a profit. As mentioned in the previous point, seeing how much your competitors are selling their products for is a good indication of what customers are willing to pay.
For shipping, it’s important to choose a trusted shipping company so that the products get delivered in a timely manner. When it comes to covering shipping costs there are a number of options you can look into, such as including the shipping costs in the product’s pricing to offer free shipping, having a fixed shipping cost for all products, adjusting it for the number of items purchased or offering free shipping when the total reaches a certain amount, such as R500 or more.
2. Build your eCommerce store
For many online business owners, this is the most fun and exciting part – customising your online store and seeing it come to life. The main points you need to consider are as follows:
Choosing your shopping cart platform
There are tons of online shopping cart platforms to choose from that offer different tools and functionalities. The different platforms offer a variety of packages, ranging from monthly to yearly subscriptions, some also offer free plans or at least free trials. What’s important is to find the platform that works best for you. Some of the most popular options are Shopify, WooCommerce (a free WordPress plugin), Prestashop, Magento, and Ecwid. It’s worth taking a look at the 80+ cart list on PayFast’s website for more ideas.
If you have developing skills or want to hire a developer to create a custom online store, then that’s a valid option as well.
Once you’ve chosen your platform and designed it to represent your brand, then it’s time to add your products. We can’t stress the importance of having high-quality photos of your products to give shoppers a realistic idea of what they are buying. You should also add a detailed description of what each product is, colour and size options (if applicable), and how it can benefit the shopper. The more information you provide will help with your search engine optimisation (SEO) ranking and also encourage shoppers to buy the product.
Related: Small Business Marketing Strategies: Google vs Facebook
Integrating a payment gateway
Before your online store opens for business you need to integrate a secure payment gateway to receive online payments. It’s important to select a payment solution that facilitates a variety of payment methods, such as Visa and Mastercard credit and debit cards, Instant EFT, Masterpass, Mobicred, Zapper, etc. to give shoppers the option of paying with their preferred payment method.
One of the leading payment gateways in South Africa is PayFast; it’s trusted by over 70,000 businesses to facilitate their online payments. It’s free to sign up and there are no monthly fees, PayFast only charges a small percentage of every successful payment. PayFast is extremely easy to set up as it integrates with over 80 online platforms as well as custom integration.
3.Market your store online
Once everything is up and running it’s time to get your name out there to attract business. This involves making sure that every web page is SEO optimised with keywords to attract organic traffic, and that you put an effective and ongoing digital marketing strategy in place. You should monitor page views and conversions by using tools like Google Analytics, which will give you insights into what you can do to tweak copy, images, or navigation to improve the shopper’s experience and to attract new visitors to your eCommerce store.
You can also use paid services to attract traffic to your website such as Google Ads and paid ads on Facebook and Instagram. Just make sure you do research into who your customer base is so you use the right marketing platform to target the right demographics.
If you haven’t done so already, register your online business on the relevant social media platforms so that you can promote your products and engage with your community. It’s also extremely beneficial to put together a database of all of your loyal customers (and potential new ones who are willing to sign up to your mailing list) so that you can send out marketing emails to them promoting new products or specials.
Related: Marketing tips for your business
While moving your business online may be challenging, with a lot of testing and experimentation it will be immensely rewarding. It’s never been more important to get your business online, so we wish you all the best on your online business ventures.
PayFast is a leading online payment processing solution for individuals, non-profit organisations (NPOs) and businesses of all sizes in South Africa. PayFast was founded in 2007 in Cape Town by Jonathan Smit with the vision of helping online merchants grow their business. Over a decade later, over 70,000 merchants from a variety of South African businesses, big and small, have registered with PayFast to process and manage online payments made by their customers. PayFast supports 7 popular payment methods (including credit and debit card, Instant EFT, Mobicred, Masterpass and SCode) and integrates with 80+ platforms (such as Shopify, WooCommerce and Xero) and custom integration.
PayFast offers a variety of features to help merchants get paid online, from platform integrations, ‘Pay Now’ buttons that can be integrated into a website, the Request a Payment feature where merchants can request payment via email and recurring billing options. Their newest feature is Split Payments, a first of its kind in South Africa that splits a portion of an online payment with a third party. This is the ideal solution for digital marketplaces, as Split Payments instantly splits out commission, membership, referral, affiliate or listing fees when a payment is made.
In July 2019 PayFast was acquired by the DPO Group, spurring the growth of Africa’s largest online payments provider.
For more information, visit www.payfast.co.za
The tax season is upon us once again and we want to help you get your business prepared for submission. Complying with your tax obligations as a small business has been made a lot easier over the past few years as SARS continues its efforts to ultimately digitize and streamline the procedure.
It goes without saying, this tax season will unfold in a different manner due to the Covid-19 pandemic. While small businesses qualified for tax relief during the first 4 months of South Africa’s lockdown period, this also impacts how you’ll need to submit your taxes this year.
We, along with some of our friends who are experts in the field, have put together a few top tips to help with your business’s submission this year.
When is the tax season?
The tax season is split into three key periods for you to remember:
- April 15 to May 31 Employers submit their reconciliation of employee earnings and all third party information providers (providers of interest certificates, medical aid certificates, retirement earnings are three examples) send their certificates to SARS and the relevant individuals. SARS also uses this information to start populating individuals’ tax returns.
- June 1 to August 31 Taxpayers need to ensure that all their information is up to date and accurate. During this period SARS will issue a large number of individual taxpayers with auto assessment notices via SMS messages. Taxpayers need to check their auto assessment on the SARS eFiling website or the SARS MobiApp and indicate if they accept the assessment outcome. SARS will also notify taxpayers whose third party data is compliant that they may file early (i.e. before September 1).
- September 1 to January 1 All taxpayers should submit tax returns and provisional taxes and businesses due on 31 August for provisional tax. SARS will issue a public notice to confirm which taxpayers need to submit a return. Those taxpayers who file manually at a SARS branch must do so by October 22. Provisional individual taxpayers who complete their return electronically must do so on or by January 31, 2021. Businesses have until 28 February 2021 to submit their return.
Related: 5 Simple Tax Tips That Save Business Owners Money and Time
Can you (and your employees) claim a tax deduction for working from home?
Thousands of employees have had to work from home since the lockdown began at the end of March. The Income Tax Act sets out basic requirements that must be met if this tax relief is to apply:
- You must practice a “trade” – which can be employment. So purely by being employed this criterion is fulfilled.
- The home office must have all the equipment you need to perform your job, such as a laptop, printer, WiFi, desk etc.
- The home office must be used often and only for you to do your job. This space should not be a family/shared space when you have finished work for the day.
- You must have worked from this space for at least 6 months of the year.
You can also find SARS’ tax relief measures guide here.
Is all relief received due to COVID-19 exempt from income tax?
“Simply put, yes,” says Bernice du Toit, Financial Accountant at Lulalend. The tax relief includes the following three sections:
- An exemption from income tax on funds and accruals received by the business from the government
- An exemption from donations tax on donations made to or by the business (limited to R10 000 per year for businesses); and
- Donations made to a business will be tax-deductible by the donor. “Deduction is limited to 10% of your taxable income per annum, and this deduction would only apply to donations for which a section 18A certificate has been obtained,” says Bernice du Toit.
Read up more on the list of registered PBO’s here, and section 18A here.
What about the TERS benefits?
SARS confirmed that TERS (Temporary Employee/Employer Relief Scheme) benefits are payable in terms of the Unemployment Insurance Act and thus exempt from income tax.
According to Bowmanslaw.com, where the employer receives the TERS benefits from the Unemployment Insurance Fund (UIF) in order to pay employees, the employer is merely processing the payment on behalf of the UIF.
Related: Tax Tips for SMEs from a professional tax consultant
Do you really need to submit a tax return?
According to Sue Willoughby of HorisonTax, it is vitally important, for many reasons, that all taxpayers stay tax-compliant. ‘“If you do not submit tax returns every year then you are not tax-compliant according to SARS. You should always submit a tax return even if it is a “nil-return”. Why do you need to stay tax-compliant? Well, if ever you need to get involved in a financial deal with any government department, institution, or municipal body, whether a loan, work contract, or otherwise, you will need to be tax compliant with SARS,” says Willoughby.
In certain cases, institutions may be reluctant to consider loans to people who are not tax-compliant. Institutions may need to see the latest SARS’s IT34. No ITR12’s and no IT34’s means you are not tax-compliant – it is as simple as that.
Visit www.horisontax.co.za if you need assistance with your filing this season.
The provisions set out by SARS and the disaster relief fund aim to help businesses and individual taxpayers stay tax compliant even during a pandemic. It’s important to remain tax compliant if you want your business to qualify for the COVID-relief. By following these tips and meeting all the relevant deadlines, you and your business can make it through the 2020/2021 tax season with a better understanding of what needs to be done to continue growing your business.
The move to Alert Level 2 means there has been a gradual increase in economic activity and for many SMEs, this was the first time they have been able to operate since March. While we are still practicing social distancing, there’s no better time to show our support for local businesses than now.
We’ve unpacked 5 ways we can all support each other as South African business owners and customers.
Find a local supplier
While we all love the convenience of being able to shop online and secure our purchases with the click of a button, in many instances, there are local businesses that have exactly what you’re looking for. Spend a little bit of time finding a supplier or store near you that stocks what you are interested in.
Many small businesses are happy to order from a supplier (if they are out of stock) and have goods delivered to you.
Chief operations officer of Rising Tide Capital, Jay Savulich, says “The most important thing to remember if you want to help small businesses in your community is that you are an investor in these businesses. Try to be as thoughtful as possible with where you as a consumer invest your dollars.”
Reschedule, don’t cancel
If you were set to attend an event, or you’ve booked a service but something’s come up (we all know, life happens), rather ask to reschedule your appointment.
Many small businesses that host events rely on this income to stay afloat. Rather than asking for a refund, commit to attending the event when a new date has been released or you can donate the funds to the business. The same goes for services if you cannot make it, reschedule ahead of time so the business can give your time slot to another customer.
This way the business is still able to make an income and you still keep your business for a later stage.
Related: 5 Ways Your Small Business Can Prepare For Black Friday
Spread the word
Giving your favourite local business a shout out on social media can go a long way. When you are particularly happy with the service or product from a particular business, follow and mention them on social media.
If they have a review portal, give them a thorough review of your experience with them. You can also go on business review sites like HelloPeter.
When in doubt, buy a voucher
For those businesses that are not yet open, there’s always an option to purchase a voucher as a gift for yourself or a friend. While you may not be able to take advantage of a business’s services or products right now, purchasing a voucher ensures they have made a sale and will welcome your business in the future.
In many cases, when customers buy gift vouchers, this helps keep the cash flow steady and means they are able to pay wages to employees. Doing your part can definitely go a long way.
Related: What is Bridging finance in South Africa?
Donate or volunteer
While we know money may be tight for many during this pandemic, if your income has not been affected, it is imperative to continue your support for local businesses in any way possible. If you are able to donate funds to a local business in your community, you could be saving someone’s job and livelihood to provide for their family. If you are cash strapped, give the gift of time by volunteering to help out in the business whether it be by cleaning, packing, or even delivering their products to customers. There is always a way to help.