The SME Guide to Business Funding

The SME Guide to Business Funding

Reading Time: 2 minutes

 

Many business owners believe the most crucial factor in success is sales. While it is obviously true that without sufficient sales a business will fail, maintaining liquidity, or having access to sufficient cash is equally important. Even the most successful businesses experience fluctuations in revenue, causing disruption to cash flow. Having fast and easy access to funding in these instances is crucial. Without it, not only will daily operations be impacted but the organization will be unable to take advantage of new opportunities.

The latest guide in our Business High Five series, The SME Guide to Business Funding, explains why access to working capital is crucial for all SMEs, as well as where and how to apply for funding.

 

Download our complete guide to SME Funding here.

 

Some of the important questions our guide answers include:

Where can SMEs access business funding?

If you search for a “business loan” online, you’ll be confronted by a staggering number of results: 1.5 billion, to be exact. And though banks still dominate as finance sources for SMEs, the International Finance Corporation (IFC) finds other loan providers have started to appeal to owners who are searching for fast, easy ways to access finance.

The three main ways one can access funding are:

  • Traditional Banks
  • Government Funding
  • Fintech Lenders

 

Related: Business High Five: Online tools to improve your business

 

How to choose a responsible business funding partner?

Ultimately, responsible lending means putting the customer first. Businesses turn to a variety of sources for funding. The problem is there are some lenders out there that don’t act in the customer’s best interests. It is important to select a funder who believes in responsible lending. This means ensuring affordability, transparency of terms and conditions, and supporting the customer when needed.

 

Request a callback from our Funding Specialists

 

How to qualifying for a Business Loan?

Do you know what your credit score is? Understanding your own and your business’s creditworthiness is a great practice in general. But it’s especially important if you’re planning to take out a loan as lenders will base their decisions, at least in part, on your credit rating.

 

Other important factors used by lenders are:

  • Trading history (how long has your business been operating)
  • Annual revenue
  • The collateral you are able to provide

 

Related: Move your business online by following these essential steps

 

Fixed Term Loans versus Credit Facilities

When considering funding, it’s important to consider the way in which you want to access capital, as well as the repayment terms. There are two broad business funding options available to SMEs.

Fixed-Term loans are the most common type of business funding, a fixed-term loan is a lump sum amount that is repaid over a fixed period of time, typically up to 10 years (depending on the size), and at an agreed interest rate.

A Credit Facility is a fast-growing alternative to fixed-term loan. Simply put, a credit facility offers instant access to a line of credit. A business can withdraw up to a pre-approved amount without needing to reapply.

 

Download the SME Guide to Business Funding.

 

 

Lessons learnt in the pandemic are key to SMEs’ survival

Lessons learnt in the pandemic are key to SMEs’ survival

Reading Time: 3 minutes

South African small and medium-sized enterprises (SMEs) are the engine-room of our economy and the country cannot afford for this to collapse because millions of livelihoods depend on them. For many small business owners, medium- and long-term planning is not a part of their business strategy, but it is time to realise that the steps taken today will determine whether their survival into 2022 or not. 

 

Request a callback from our Funding Specialists

 

 

“There is a rich abundance of knowledge, skills, and expertise in our SME sector – all of which has played an essential role in SMEs survival and ability to adapt during the pandemic. Part of this is that we have had to move away from a ‘business as usual’ approach and realise the need to learn from the lessons that the past year has taught us in order to plan and prepare for the future,” says Trevor Gosling, CEO of small business service provider Lulalend.

 

Related: 5 Growth areas for your business in 2021

 

The government’s financial assistance to the SME sector will need to be supplemented with decisive action taken within the SME landscape, he adds. 

 

“The R1.4bn relief package is not enough to save a sector that contributes an estimated R1.5trillion to the economy. Yes, the financial aid is welcomed but it is crucial that SMEs take action to ensure that they are able to recover from the economic hardship that the last year has dealt them,” says Gosling. 

 

To do this, it will require business owners to critically evaluate what did or did not work over the past 12 months. “While there is a renewed optimism, now that the first vaccines have been administered, it is not the time for SMEs to slow down and wait for recovery,” says Gosling.

 

“Are there better, cheaper, and more efficient ways of delivering your service, and are there unnecessary overheads that you can cut? These are the things that business owners need to think about when mapping out their plans to survive and grow over the next two years,” he explains. 

 

Related: What Challenges Do Female SMEs Face in South Africa?

 

Equally so, Gosling says that SMEs need to understand how their customer base and needs have changed, which includes the competition. “These shifts are important to consider, especially if you want your marketing efforts to yield the maximum results. If your customer base or their needs have changed, it is important that SMEs focus on building new relationships to deliver repeat business in the future.”

 

During the year ahead, time will need to be taken to revisit business plans and develop long-term strategies, to not just survive but to thrive. Many of the actions taken in times of crisis can be beneficial to a business in the long run. 

 

Owners should consider how hastily streamlined processes and drastically slashed overheads can be refined to create a new, efficient, and cost-effective business model that can still deliver the best goods and services to their customers. Combining this with the advantages of applying digital technology can set a business owner on the road to recovery and a thriving future. 

 

While most companies have been moving online over the past few years, the pandemic has shifted this into overdrive. He says that there is no turning back. “People have now gotten used to living in a digital world.”

 

Related: 5 Digital Marketing Strategy Tips: COVID-19 SME Support

 

But, going digital does not necessarily mean that developing an e-commerce offering is the only way that this can be done. “Digital technology can help to automate and streamline other aspects of the business, including stock control, financial management, and payment facilities,” he adds. 

 

Lastly, and probably the most important for survival, is for businesses to ensure that they have effectively managed their cash flow. As part of the planning, it is essential that time is taken to analyse what can be done to reduce financial constraints in the year ahead. In addition to this, access to capital to invest in growing or pivoting the business will be crucial.

 

“It is important that SMEs talk to their credit providers about access to funding, including a revolving credit facility to help manage their cash flow,” explains Gosling. 

 

“Survival is dependent on shifting business strategies and plans, as well as leaning on partnerships with service providers, stakeholders, and customers. The year ahead will be a bumpy one, but with the right support it will be possible to come out the other side in a much stronger position,” says Gosling.

 

Customer Testimonial: Risk X Data Assurance

Customer Testimonial: Risk X Data Assurance

Reading Time: 2 minutes

With every business funding application we receive, our Funding Specialists (supported by our AI-driven technology) work tirelessly to thoroughly vet, approve and then disburse the required funds in the quickest time possible. We do this so that businesses can take up new opportunities as soon as they arise.

So, if business owners share their experience with us (good and not so good), we take it seriously. When Andrew Dalrymple, Director at Risk X Data Assurance, shared his story with us, we knew we had to share it. His experience marked a true representation of how Lulalend aims to assist SMEs across SA to continue growing and succeeding at every turn.

 

Request a callback from our Funding Specialists

 

Related: Women Powering SA: Sheila Visser; Cheryl Chapman, Wolf Printing

 

Why did you first come to Lulalend for funding?

Risk X is an SME offering high-end information security audit, advisory, and assurance services to government and private sector clients across a wide range of business verticals. Favourable market conditions presented us with a variety of growth opportunities but as a young business, we did not have the capital reserves to fund this growth internally. After being turned down by the traditional banking sector, we approached Lulalend who provided the funding we needed to take our business to the next level.

 

How has Lulalend helped your business thus far?

We have accessed two tranches of funding from Lulalend and consequently have been able to grow our business throughout the Covid pandemic, with the certainty that we will be able to meet our short-term cash flow commitments without having to compromise the quality of our long-term strategic decision making and client relationships. Lulalend may not be a long-term capital solution, but they can be an absolute lifesaver as a short-term cash flow supplement, and certainly were in our case.

 

Related: Business Funding: An overview of how SMEs can access funding in SA

 

Would you recommend Lulalend to other SME business owners?

I would absolutely recommend Lulalend to any SME who has been let down by the formal banking sector and needs working capital to fund growth in their business. They have a transparent model and a highly ethical approach to lending and take a personal interest in the success of your business. Our experience with them has been exceptional.

 

“Lulalend saw the potential of our business when other lenders did not and supported us with the cash flow we needed to scale up at a critical stage of our company’s growth. Their lending model and willingness to commit to South African SME’s is a critical enabler for many businesses like ours and the economy as a whole. Lulalend has been ethical and upfront in all of their dealings with us and the level of interest and concern for our progress that Lené has shown throughout goes beyond the purely commercial nature of the relationship. I would recommend Lulalend to any SME that needs short-term cash flow support.” – Andrew Dalrymple.

 

We hope that when your business requires a cash injection, you’ll always think of your friends in funding first.

 

What is Employee Experience?

What is Employee Experience?

Reading Time: 3 minutes

For several years ‘customer experience’ has been the driving force behind many business strategies that bring about product development, marketing, and all-around business culture. However, recently, there has been a shift in focus to what many are calling ‘the age of employee experience’.

Here’s what you’ll find out in this article:

  1. What is Employee Experience
  2. The importance of Employee Experience
  3. Why there has been a shift from culture to experience

 

What is Employee Experience

The rise of what we’ve come to know as ‘employee experience’ has set new demands for most businesses. An easy way to understand this fairly new concept is by saying, if customer experience relates to how we measure all communication a company has with its customers, then employee experience relates to everything the workers of a company experience – every interaction from the very first interview up until the moment they leave the company.

 

Related: All you need to know about a revolving loan

 

Employee experience goes beyond providing a great place to work. It forces companies to offer their employees a new level of support in their career and personal wellbeing, flexibility, and a plethora of opportunities.

Some key features of a good employee experience include, but are definitely not limited to;

  • Protecting and encouraging a healthy work-life balance
  • Encouraging a collaborative work environment
  • Using technical advances to minimize ‘meaningless’ tasks
  • Offering flexibility and support for individual schedules
  • A designed professional development plan to suit each employee’s growth
  • Encouraging employee autonomy and self-direction
  • Promoting an environment of purpose and meaning beyond making money

 

Related: What is a business credit facility?

 

The importance of Employee Experience

So the question on everyone’s mind is, why is it so important? According to a Forbes article, in 2019, employee experience became a ‘preeminent corporate priority’. The reason for this is partly due to the evolution of the employee-employer relationship, as well as the fact that job-hopping is more frequent than ever. All in all, there is an imminent need for companies to raise the bar when it comes to retaining employees and providing a thriving work environment for their people.

 

Why there has been a shift from culture to experience

There’s no doubt that the rising importance of “customer experience”, with its focus on empowering individuality, influenced it. Where most companies previously focused on employee engagement and company culture, recently it’s more about overall employee experience.

While company culture is still important, it’s significance is limited. Your office can be as trendy as ever, filled with table tennis areas, Friday drinks, and casually dressed staff working flexible hours – but that will only get so far. These types of perks are fast becoming the norm and probably do promote collaboration and a shared vision, but if employees are not motivated and engaged with their work, these perks are futile. Employee experience relates to the daily norms of the workplace, the bonds between team members and managers, the sense of support between everyone in the company. These are the things of real value.

 

Related: Business Funding: An overview of how SMEs can access funding in SA

 

So why should SMEs care about investing in their company’s employee experience?

Those who make a sustained investment into employees are able to retain top talent within their industries, dominate the competition, and in turn, promote higher turnover because people are motivated to do their best at every turn. According to HBR, on average, companies that invested in the experience of their employees returned over four times the average profit – despite being around 25% smaller, implying greater levels of both efficiency and creativity.

The statistics certainly back up the hype: having a positive experience is not only crucial to attracting and keeping the best workforce, but staying relevant as a business, too.

 

How to increase your business resilience

How to increase your business resilience

Reading Time: 2 minutes

There’s a very good chance that you’ve been talking about resilience in and around your business and there is a good reason why. In a 2016 survey, Control Risks explained business resilience as “an organization being able to identify, analyze, and implement planning to be better able to recover or ‘bounce back’ from disruptive events”.

Many business and managerial practices have proven that a focus on resilience is increasingly important to ‘bounce back from disruptive events’, such as a global pandemic. In this article we share insight on the following:

  • What is resilience?
  • How do you manage and measure it?
  • How do you build a more resilient business?

 

Request a callback from our Funding Specialists

 

Related: Increasing Your Business’s Resilience to Come Back Stronger

 

What is resilience?

Business resilience can be defined as an organization’s ability to predict, plan, react, and adjust to changes and disruptions in the business environment. If a company can effectively develop its resilience, it can eventually secure its ability to accomplish its goals and objectives, regardless of the unpredictable events and changes taking place.

 

How do you manage and measure resilience?

Traditional management methods have some significant drawbacks that make it difficult to assess and achieve resilience:

  • Many conventional companies have been designed to increase shareholder value from dividends and share value. Very few organizations really aim to calculate resilience beyond particular material threats.
  • Companies and shareholders also concentrate on optimizing their short-term returns. However, resilience requires a multi-time perspective: to forgo a certain amount of productivity or success now for the sake of more sustained performance in the future.
  • Businesses have focused primarily on designing and implementing stable strategies that perform well when the causal relationship is simple, predictable, and unchanging. Resilience deals with what is uncertain, changeable, unpredictable – which although can have serious implications.

Managing resilience requires more than just coming up with new ideas or resources to apply to today’s approaches. It needs a different business model – one that embraces complexity, uncertainty, interdependence, systems thinking, and a multi-time scale perspective.

 

Related: How to write the perfect business plan

 

How do you build a more resilient business?

There are 3 major areas through which resilience can be enhanced:

Leadership and strategy – Building a resilience vision starts with the identification and awareness of vulnerabilities and an overview of the possible effects of these vulnerabilities on the business.

Operations – Operational resilience can be improved by recognizing possible crises that might affect the business and rating these threats against the effect they will have and then implementing a risk reduction and management plan.

People – Employees and their expertise are essential to the organization’s resilience. Investing in the workforce is the only path forward. Ability levels, turnover of workers, work satisfaction, training, and learning opportunities should be closely controlled. Ensuring that people are involved in the change program, and keeping them motivated, will yield rewards for every business.

 

Let’s not forget, many businesses already take on some form of risk management but mostly to understand the effects of specific, known risks. Your business’s resilience should also be to deal with unknown risks, be able to adapt and change any external stress, and possibly turn it into an opportunity to succeed.