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Bridging finance can be used by business owners for a range of purposes. Particularly when they need a quick cash flow injection. It’s a form of business finance that works as a cash advance and helps to bridge that gap in your cash flow. With bridging finance you can cover costs immediately while waiting for an expected cash boost.
Bridging finance is any type of short-term financing arrangement intended to cover a business’s cash flow gaps until it can arrange for longer-term financing. This type of financing is generally needed to fund a business’s operational needs and is usually in the form of working capital. It can be particularly handy when expanding your company or premises or when there is a project that requires you to have immediate cash flow but only pays out later.
5 Ways that Bridging Finance can help your business
- Fast access to finance to boost cash flow
- Provides a buffer in between receiving payments from customers
- Gives options of flexible repayment options
- Can prevent financial loss for seasonal business needing to purchase stock mid-season to make profit
- Allows you to buy out a difficult partner
Types of Bridging Finance that are useful for business owners to know
- Closed bridging finance: Is available for a fixed period of time (generally a few months) agreed on by the lender and borrower. It tends to be more accessible as the lender has a higher level of certainty when it comes to repayment of the loan.
- Open bridging finance: Has no fixed date for repayment. This can be a desirable option for businesses who don’t know when they will be accessing the funds needed to pay off the loan. The interest rates tend to be higher because of the higher level of uncertainty around the repayment.
- Debt bridging finance: Is when a business takes out temporary finance to cover short-term costs while awaiting finance. The loan serves as a bridge as it connects the borrowing company to debt capital. For this type of debt, it’s important to understand what interest you’ll be paying so you don’t exacerbate any existing financial difficulties.
- Equity bridging finance: This is when businesses seek capital from venture capitalists to avoid high interest debts. For example, a venture capitalist firm might provide a business with capital in the form of a bridging finance round to tide them over while they raise equity financing. The borrowing business might then offer the lending firm equity ownership in exchange for funds.
Related: 5 Reasons why access to business funding is important
Common uses of Bridging Finance
- Helpful for quick access to cash for a down payment.
- Purchasing new equipment that is priced above the amount of cash on hand available to a business
- Covering essential operational costs (such as salaries) during temporary dips in cash flow
- If you’re a seasonal business, it can help sustain cash flow during low season
Related: The SME Guide to Understanding your Financial Health
Apply for Bridging Finance with Lulalend
We have solutions that offer your business a cash flow boost when you need access to funds sooner rather than later. We offer bridging finance that is unsecured, and easily accessible within 24 hours. We also offer the option to settle early without having to worry about penalty fees.
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Running a business is a long game that requires flexibility, adaptability and money. To keep it running in the right direction and meeting your growth trajectories is an ongoing commitment. Just as you’ve gathered the funds to get started or your profit is looking good, there comes occasions when extra funding is needed. It goes without saying that access to funding is vital for your business. Particularly funding that can keep up with needs intrinsic to your industry changes, challenges and requirements. Here are 5 reasons to keep in mind on why access to funding is important for your business.
1. Research and development
2. Fast access to funding helps secure cash flow
3. Good liquidity helps SMEs trade through turbulent time
4. Funds on tap allow businesses to respond quickly to growth opportunities
5. Unforeseen costs
Research and development
While not every business needs research and development in the earlystages, every business needs to stay relevant and innovative. Especially SMEs because they have to keep up with unexpected challenges and competitors with better resources. On the other hand many business owners still rely on thorough research to get ahead of the competition, often leading to having to finance the process. Ultimately, research and development is necessary for accelerating innovation and sustaining relevance, and it requires funding.
A few meaningful ways to start your R&D funding include approaching venture capitalists, seeking government assistance, alternative lenders such as Lulalend and using crowdfunding.
Fast access to funding helps secure cash flow
The money that moves in and out of your business is important. Any sudden changes can impact your business negatively. Which is why positive cash flow is so important. If it dries up it’s difficult to recover and this inevitably affects all aspects of your business. Anything from seasonal slowdowns or recessions can strike at any time and it’s important to be prepared. With fast access to the right funding you’ll be able to keep a positive cash flow problems arise. Consider flexible options such as Lulalend’s revolving credit facility which is useful to business owners across all industries. This allows you to keep up with the kind of cash flow challenges that affect your business directly without applying for funding every time.
Related: Understanding business credit assessments
Good liquidity helps SMEs trade through turbulent times
SMEs generally don’t have big cash reserves to fall back on, so when sales drop they need a safety net to meet day to day operating costs. Ideally a business should have anywhere from a month to six months of cash on hand in case of emergencies. Liquidity requires having accessible funds and together with cash flow, it’s crucial to the survival of small businesses. Keeping a close eye on liquidity allows business owners to make smart decisions about their finances and a healthy ratio helps creditors determine your creditworthiness to secure your business the credit it might need. SMEs need to track the financial health of their businesses and measuring liquidity helps to strike the right balance.
You can look to financing companies to secure additional funding when the chips are down. This can afford you the flexibility to get through unprecedented cash flow crunches and buy you time to improve or rebuild your usual ebb and flow.
Funds on tap allow businesses to respond quickly to growth opportunities
A new, recovering or growing business needs money to fund expansion strategies. When a business begins to grow, new locations, products, equipment, more marketing or employees might be required. Consider businesses in the construction industry for instance, where upfront investment may be required to fund projects. These activities add to the existing costs and may need additional funding. At this point profits may be slim and whatever the stage your business is in, outside financing might be an important driver of success to reach those new levels of growth and business development.
Related: 4 Ways to improve your business’s cashflow
There’s no telling when an accident might jeopardise your hard earned work. From fires to floods, natural disasters and as recently experienced in South Africa, destructive protests and looting, or even staff injuries. You have to stay prepared. While insurance might cover most events, premiums still need to be paid and money for salaries still needs to be available during repairs. Even for less disastrous accidents such as malfunctioning machinery or outdated machinery, equipment breaking, just needing to be upgraded or systems being hacked, funding can come in really handy.
Funding allows businesses to plan ahead. In today’s rapidly evolving financial services industry, it’s good to know the options you can rely on. Importantly, it’s good to build good credit and relationships with alternative lenders like Lulalend that can offer you the flexibility you need to access funding easily and efficiently.
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Your business model is your business’s plan to make a profit. It’s an outline of how your business plans to make money which allows you to identify your target market and their needs, the expenses you should anticipate as well as the products and services your business plans to sell. Business plans are important for both new and established organisations, as they help businesses attract investment and talent. Importantly, they help assess whether things are working the way you want them to.
To keep ahead of trends and changes, it’s important to review and update your model. Here are 4 ways to consider reviewing your business model.
1. Customer value proposition
Customer value proposition
Do you still resonate with your customers and are you taking their feedback into consideration? Reviewing your value proposition is a great way to establish your relevance in meeting your customers’ current problems, or how you can make adjustments to your product to keep improving their situation. Doing customer research to establish what your customers need can help you in this process. It can give you quantified feedback on the specific benefits of your products. You can find some useful tips for this on our blog post How to Drive Sales Through Customer Retention. It could also spark ideas that you may have overlooked initially. Remember to solve real and important problems for your customers, maintain your differentiation from competitors, and remind your customers why they should trust your brand.
It’s imperative to understand your profitability for the success of your business. The profit your business makes should be used to help secure growth opportunities. Analyse how your business brings in money and opportunities for growth. Start with a profit and loss statement. If you don’t already have one in place, you can start by individually listing how your business generates income and spends money. Also, consider doing a pricing review to understand if you’re making enough margin to be profitable. Once you’ve consolidated the audit, you can try to eliminate work that costs you money and focus on opportunities that generate income. To get a good idea of how to approach this, have a look at Freshbook’s step-by-step outline on how to check if your business is profitable.
Related: How to Drive Sales Through Customer Retention
Take some time to consider if the resources currently available to you are appropriate for your business model and how it’s evolving. Do you have access to the right people, and are you meeting your financial goals? Whether the answer is yes or no, it’s always a good idea to review this aspect of your business. Consider your capacity and demand management, your resource utilization as well as your progress and time tracking. It’s important to establish your actual resource availability and to get a realistic view of your demands and capacity to deliver. Understand what roles and skillsets you need and streamline communication between your employees and the business, as well as with your stakeholders. If you’d like some ideas on how to get started, Planview – a portfolio and work management solutions organisation – has great advice on resource management best practices.
To run a business, processes are used every day. In the quest for efficiency, it’s important to review them and keep the ones that make sense, and improve the ones that don’t. With rapid changes in technology and the evolving demands of your target market, dysfunctional processes can lead to breakdowns in communication, increased costs, or unhappy customers to name a few challenges. Make this an important step to review to help streamline your tasks and business activities. To get started on this consider these steps recommended and outlined on Mindtools:
Step 1: Map the process
Step 2: Analyse the process
Step 3: Redesign the process
Step 4: Acquire resources
Step 5: Implement and communicate change
Step 6: Review the process
Related: How to Write the Perfect Business Plan
Running a business is hard work, but regularly reviewing your Business Model can make planning for the future easier. Make it a priority to keep up with the ever-evolving needs of your clients, talent, and expectations of any investors so you can stay relevant. Try not to overlook the components that make you successful and how you can upgrade them. Remember, if any of your adjustments need financing that you might not have at the time you can always get in touch with one of our Funding Specialists at Lulalend to find out how we can help you meet your business objectives.
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27 March 2021 marked one year since the introduction of the five-tiered Alert Level system and South Africa’s move to Alert Level 5. Like many people, we’re reflecting on the year that’s been.
One year later and many businesses are still feeling the effects of having to adapt and survive during a global pandemic. We’ve seen many businesses close their doors, some shift their focus and new businesses arise. All of this indicates that South African entrepreneurs are committed to strengthening the economy with the help of government subsidies and other alternative business funding resources.
In more recent months we have seen an undeniable surge in business activity due to the easing of lockdown restrictions. There has also been overwhelming support shown between businesses as well. “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, and co-founder of Lulalend.
Download our eCommerce Guide for more information on how to take your business online.
Related: 5 Digital Marketing Strategy Tips: COVID-19 SME Support
The most obvious and widespread impact of the pandemic and resulting lockdown on SMEs was on revenue.
The commencement of Level 5 lockdown impacted SMEs income streams, leading to cost-cutting and even layoffs. Some of the most affected industries include tourism, hospitality, non-essential retail. At the height of lockdown, a large percentage of Lulalend’s customer base told us that they only had 1 month of cash runway to make it through.
Source: McKinsey & Co “How SA SMEs can survive COVID-19” July 2020.
In an effort to adapt and diversify, many businesses turned their heads towards a more digital approach during the early days of lockdown. This encouraged online sales and boosted vulnerable retail sectors that would ordinarily function on a bricks-and-mortar basis. And here we saw the rise in new – and quirky – new business too. The rise of eCommerce brought about a new digital age like never before. “People have now gotten used to living in a digital world,” says Gosling.
Businesses that were able to take advantage of digital optimisation are those that had access to a line of credit in a time of need. Positive cash flow is essential for the survival of your business – especially during uncertain times. When you run into cash flow challenges, you are not able to pay your bills on time risking a decrease in its credit line or higher interest rates. That’s why having access to fast and efficient business funding or a revolving line of credit is essential for all small businesses.
Related: What Challenges Do Female SMEs Face in South Africa?
While the economic recovery from Covid-19 is well on its way, we have to understand that it’s far from over. Business owners need to take the necessary steps to plan and develop long-term strategies to survive and thrive in the ever-changing global economy. Taking the time optimise business operations will go a long way in determining the success of the organization in the long run.
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There has been a permanent change in the way that people shop and, in turn, the way that businesses need to operate. In the absence of brick-and-mortar stores being open during the lockdown, as well as a general fear of crowded malls when things were able to re-open, South Africa’s eCommerce sector exploded.
According to Trevor Gosling, Co-founder, and CEO of Lulalend – a financing partner to South Africa’s small- to medium enterprises (SMEs), he has seen phenomenal growth in eCommerce businesses who have connected with them for SME financing. Between the period of October 2020 and February 2021, we saw an 86% increase in loans made to eCommerce businesses and online retailers in comparison to the same period between 2019 and 2020.
“The loans were strongly linked to growth-related requirements, such as the purchasing of inventory or the expansion of marketing,” Gosling explains.
“The reality is that South Africans have now become familiar with and are used to the convenience that shopping online provides. For those who have seized this opportunity and taken the time to invest in developing their digital offering, they will continue to see rewards in the long-term,” he adds.
Related: Move your business online by following these essential steps
One of the fundamental differentiators around eCommerce in 2021 is that, while in the past this has been dominated by retailers, the adoption and familiarity that people now have of purchasing goods and services online has meant that nearly all sectors can capitalise on this trend.
The boom in demand also allowed businesses across a variety of categories to adopt a new way of delivering their products with innovative non-contact formats – whether contactless payments or automated fulfillment systems to help curb the spread of the virus.
“Gone are the days when buying online was simply a purchase of a book, clothing item, or food. Nowadays, having a business presence online that integrates eCommerce functionality will become a lot more common,” Gosling points out.
It takes more than just setting up an online site. Gosling says that new competition emerging out of this pandemic and advancing technologies will require SMEs to incorporate innovative ways of marketing, selling, and fulfilling customer orders if they are wanting to maintain and grow their bottom line.”
Related: Lessons learnt in the pandemic are key to SMEs’ survival
This is where SMEs will need to invest. From the increase in new loan applications from eCommerce businesses that we saw, Gosling says that one of the biggest learnings from them is the need to pressure test any new technology or systems that might be brought online. “It will be important to expand capacity limits as well as invest in systems that will allow for personal, timely and automated customer interactions and sales fulfillment.”
“A secondary, but equally important, the benefit is that it’s not just about an increase in revenue. Doing so means that they are able to reconnect with their existing customer base all while expanding their brand presence to new and potentially untapped markets,” he adds.
Related: How to move your retail business online
Understanding the purchasing paths of these new online customers and ensuring that your platform provides a seamless and simple shopping experience across different devices will be critical. “For those with physical stores, it will also mean ensuring that they are experience-led and digitally connected to any eCommerce platform that could assist in generating sales after the customer has left the store,” Gosling points out.
To do this will require access to capital. “Taking on debt is often essential to business growth. Being able to invest in your business to ensure that it meets the changing needs of its customers is crucial for survival,” he adds.
“Now is the time to act. The world has changed and so have the ways that customers connect with brands. To ensure that they capture market share and emerge after the crisis as market leaders, business owners will need to start making these changes now,” says Gosling.
To help SMEs wanting to move their business online, we’ve created a practical guide that is available as a free download here.
Together with a number of industry leaders within the online retail sector in South Africa, Lulalend will be taking part in the inaugural Ecommerce Day, which will be celebrated on 10 March 2021.
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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:
- What is Employee Experience
- The importance of Employee Experience
- 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.