All you need to know about a revolving loan

All you need to know about a revolving loan

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If you’ve ever wondered about how you can keep your finances above board without being stuck with a fat bill of fees, perhaps you should consider a Lulalend credit facility as a revolving loan.

Lulalend’s secure and paperless online application process takes only minutes. You can access up to R2 million in unsecured, unrestricted business funding. And because your business is important to us, your account is managed by a dedicated funding specialist.

 

WHAT IS A CREDIT FACILITY?

Simply put, it is instant access to a line of revolving credit, without needing to reapply. It is a flexible financing solution that allows you to withdraw, repay, and withdraw again.

For a small business, easy access to working capital can mean the difference between a good trading month and a bad one. Lulalend’s business credit facility gives you the peace of mind of knowing you can immediately access business funding when you need it most.

Related: What is business finance and it’s importance?

HOW DOES A LULALEND CREDIT FACILITY WORK?

You access your business line of credit when you need it, rather than reapplying for new business finance each time. No more unnecessary paperwork when you need extra funding; simply log in to your Lulalend profile and access funds at the click of a mouse when you have a revolving loan. Here’s why more business owners are using Lulalend’s credit facility to grow:

  • You only pay for what you use.
  • There are no monthly account fees.
  • Settle whenever you want, pay no early repayment penalties.

And because the facility works like revolving credit, the capital amount becomes available again after every repayment. As your business grows, we also increase the amount of credit available in your revolving loan. 

To qualify, you must have been in business for at least one year and make a minimum annual revenue of R500 000. 

 Related: What is a business credit facility?

WHAT DOES IT COST?

We’ve simplified the lending process with our 6 and 12 Month plans. Every month you pay back 16th or 112th (depending on which plan you choose) of the total advanced amount plus the monthly cost. Monthly costs are 2% – 6% of your advanced amount for the first 2 or 4 months (plan dependent) and 2% for each of the remaining months. Plus, if you can pay early, you’ll save and there are no early payment penalty fees.

HOW TO APPLY FOR A CREDIT FACILITY?

The application is easy and seamless without our online portal in 3 simple steps:

  1. Complete an online application in only minutes
  2. Get approved within hours
  3. Receive funds within 24 hours

Submit your application here.

To ensure a quick and easy application process we only require basic information about your business. You’ll only need to provide us with the following:

  • Basic personal information
  • Basic business information 
  • Most recent 3 months bank statement or transactional information

Related: Business Loan Application: Getting a Business Loan in South Africa

Different lenders have different application processes. Banks typically require more paperwork and take longer than alternative lenders such as Lulalend. Lulalend’s online application process takes only minutes and is paperless. Lenders will consider your business performance and ability to repay the credit when they assess your application.

Does Alternative Lending Make Sense as a Cashflow Management Tool for Your Business?

Does Alternative Lending Make Sense as a Cashflow Management Tool for Your Business?

Reading Time: 3 minutes

Running a small business is hard, especially now during lock down. One of the biggest challenges that faces small and medium-sized businesses is cash flow how does one keep the lights on when cash flow is tight? For business owners, managing business operations is hard enough, but throw in managing the finances and it can sometimes feel impossible.

In this post we will introduce how an alternative credit lending facility can help SMEs take advantage of growth opportunities, to not only keep their business operating but also generate a positive ROI in the long term.

Cash flow management 

How does one manage business cash flow effectively?

More Sales? – the easiest and best would be to increase sales while managing costs – if only it was that easy! With the constant drive to increase sales while juggling cost inputs (all with different timelines) one really needs to know how to juggle one’s cash reserves

Credit Facility? – having access to a credit facility, be it a bank overdraft or an alternative lender credit facility, can be a lifesaver,

Bank overdraft vs a Credit Facility

What’s the difference between a traditional Bank Overdraft Facility and an alternative lender Credit Facility?

When does alternative funding make sense?

Credit lending facilities can serve a specific purpose and may not work well for every business. How do you know if this is a good choice for you?

You need a quick turnaround

  • Some deals appear and you need to act quickly. This does not allow for the long lead times of traditional lenders. You can access capital from Lulalend within 24 hours. 

You are not being approved by a bank 

  • Traditional lenders have traditional credit models, which do not suit all businesses. Lenders like Lulalend can assess a business’s ability to repay a loan in minutes using their machine learning algorithms and alternative sources of scoring data. 

The costs are not clear

  • When assessing a business opportunity, you need to have a clear idea of what the costs are to ensure you are making money. Loan initiation fees, early settlement penalties and ongoing account costs are often “hidden” costs that can make traditional lending not as cost-effective as they appear. 
  • Lulalend’s fees are completely transparent – there are no initiation fees, no early settlement penalties and no account fees – you only pay when you access your facility

Margins can support the costs (Positive ROI)

  • When making any business decision that requires using a credit facility, you should check that your income and margins can support the cost of that funding. Here are a few simple examples: 

The advantage of using a lender like Lulalend, is that you can calculate your investment costs with 100% certainty before you commit to a deal so you can ensure your ROI is positive. In addition, as soon as your deal is done, you can park the Lulalend facility – at no cost! – until the next deal presents itself. 

 

Apply in minutes online and get business funding in your account in 24 hours.

 

Increasing Your Business’s Resilience to Come Back Stronger

Increasing Your Business’s Resilience to Come Back Stronger

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In the face of COVID-19 most businesses have already been taking some steps, out of pure necessity, to increase their resilience.

However, as we settle into the uncertainty and prolonged semi-locked down period, we thought we would highlight the areas most experts agree should be prioritised to increase business resilience.

In this instance we define resilience as the ability to come out of a crisis faster and stronger than competitors in your industry.

In terms of survival over the lock down period many businesses have already made use of Cost cutting, and while most owners are good negotiators, we tend to get lax in times of plenty. We must use the memory of COVID-19 to keep us on our toes in terms of how we spend our budgets, how often we choose to negotiate and how extravagant we are in times of plenty. In addition, as seen in this McKinsey study of 2000 businesses, in times of crises an early and strong focus on cost cutting can better position your business for an earlier and stronger recovery. It is worth noting that in this instance the best form of cost cutting is increased efficiency through greater digitisation.

In addition to this, business insurance, as we have all seen, is worth the investment. So too is staying on top of things like UIF and encouraging your employees to invest in income protection. It is far too easy to underestimate how often these big crises occur, but once a decade is a good benchmark (last decade there were two – 2002, and 2008).

This leads to the next level of resilience – building up savings or having access to funds that can see you through any prolonged period of reduced income. On a personal level we are told to build first 3 and then 6 months worth of savings as an income buffer – and it shouldn’t be any different for your business.

While you are building this buffer up, and indeed after, it is worth having additional funding options in place. Fast access to funding allows you to fill any gaps, or more importantly to take advantage of opportunities to grow your business and recover faster ( Lulalend’s instant access credit facility is designed to help support your business through good times and bad. It has no fixed fees so it costs you nothing to have it in place “just in case”).

Throughout the current crisis we’ve all felt there was a lot of noise, but few quality sources of information. Did you manage to discover the right source of business information. If not, it is worth making sure that you have a good, reliable source of information so that you don’t waste time trying to find the answers you need. This allows you to take action faster and keep your focus where it is most needed.

One area that can help with this is finding a good mentor or building a strong network. Simply looking for businesses in your industry either locally or internationally and sending out a request to ask for some guidance can be the beginning of increased support and insights.

What is clear from the McKinsey study is that the most resilient businesses act faster to recover faster, especially as opportunities begin to present themselves as the markets change, and as competitors begin to offload assets. Furthermore the gains they make during this time stand them in good stead for years to come.

 

Business Funding: An overview of how SME’s can access funding in SA

Business Funding: An overview of how SME’s can access funding in SA

Reading Time: 5 minutes

Searching for business funding for your SME can be a complicated journey.

But it doesn’t need to be.

In this post, you’ll learn more about the most common ways you can get business funding in South Africa.

Jump to the section to learn more about:

  • How to find COVID-19 business funding
  • How to determine the right type of funding for your business
  • List of common funders

COVID-19 Business Funding

Small businesses across South African took a knock during the COVID-19 pandemic.

Business owners told Statistics South Africa they had:

  • Lower turnover
  • Paused trading
  • Decreased working hours

And, just under 40% said they would turn to the government for funding relief during the pandemic.

And the numbers show there’s been an immense need for business funding:

  • The Department of Small Business Development received more than 30 000 applications for its Debt Relief Scheme. Eventually, 1 497 SMEs received R513 million. In total, there was a shortfall of over R4 billion
  • When applications opened for Johan Rupert’s SME relief package, SMEs submitted 10,000 applications for R2.8 billion. That exceeded the fund’s R1 billion available funding

There are, however, still sector-specific business funds available to SMEs.

And, the Small Enterprise Development Agency (Seda) shared the key COVID-19 funds with us.

Here is an overview of these sector-specific schemes:

  • Small-scale bakeries and confectioneries support scheme: small businesses can apply for equipment finance or working capital
  • Informal and small-scale clothing and textile support scheme: open to seamstresses, designers, art designers, shoemakers, etc. SMEs can use the funding for new business opportunities, courses to improve key skills, and business credit
  • Automotive aftermarkets support: open to all auto mechanics, diesel fitters, panel beaters and spray painters. Funds can be used for working capital
  • Spaza shop support scheme: general dealers and traditional grocery stores in townships and villages

Sibongile Somdaka, marketing and stakeholder relations at Seda, encouraged businesses to register on the government’s COVID-19 SMME Support registration portal to apply for any of these schemes.

“We have been inundated with inquiries from clients who are non–compliant with the online registration platform.

“Because of this non-compliance, many of our clients are missing out on these available opportunities from government,” said Somdaka in a note to Seda offices.

If you want more information, you can now visit the Seda offices. On 14 June, Seda branches opened in some parts of the country.

General business funding

Beyond COVID-19 funding relief, there are hundreds of business funding products available to you.

How to find the right one for your business?

Lucille Bester, the Head of Client Relations at Lulalend, shares advice on the best ways to fund your business.

How do you get funding for a business?

As an SME, you might know about the main ways to get funding.

According to this International Finance Corporation (IFC) study, these were the most popular ways to get business funding in South Africa:

  • Banks
  • Personal savings from investments
  • Business partners
  • Credit card
  • An investor
  • Friends and family
  • Government grant
  • Fintech funder

Before taking a closer look at each option, you need to determine why you need business funding, said Bester.

“Do you need to pay a bill? Do you need funds for a piece of equipment that will generate income in six months?”

Once you have figured out the purpose of the funding, you will be able to answer other questions, like:

“Is this short-term long or long-term funding?”

Determining the purpose of your funding will save you time during the application process.

Many SMEs approach the wrong funders applying for the wrong type of funding product, according to the South African SMME Access to Finance Report.

Examples of types of business-specific funding include:

Businesses also needed funding to start new businesses, according to the report.

Gaining an understanding of the purpose of the funding lets you better plan your cash flow, said, Bester.

“You don’t want a case where you take inventory financing for over 24 months to five years. You’ve sold the inventory and already generated that income. But, you’re still repaying that loan. It doesn’t look good on your balance sheet.”

Paying off a loan for goods that are no longer bringing in revenue has the potential to harm your creditworthiness.

“So, if you have inventory finance over a three-month period, it’s not sitting on your balance sheet after that term. But, if you took funding for a piece of equipment and you bought that equipment, it’s an asset and it’s generating income for you. This looks good on your balance sheet.”

Funders evaluate these factors when they process your business funding application.

“Creditors look at your assets, liabilities, and equity.”

So, before you approach any funders:

  1. Gain clarity on your business needs and goals
  2. Find the business funding product that fits your needs
  3. Determine the criteria
  4. Submit your application

How do I get money to start a business in South Africa?

By now, you can see there are different ways to raise money for your business.

If you need capital early in your business journey, your options might be more limited.

That’s because banks, for instance, would require collateral.

“Banks would give you a reasonable rate but they will ask for collateral. And they’re not going to be quick and easy,” said Bester.

Banks often want longer trading histories, too.

Often, this makes it hard for newer SMEs to secure business funding from banks.

And while friends and family were the top sources of business funding for SMEs in other countries, Bester said SMEs should consider this option carefully. There’s always the risk of complicating your relationships.

Even if you can persuade family and friends to lend you the money to start your business, it’s not that easy in South Africa. Unequal wealth distribution severely restricts this form of finance for most South African SMEs.

Bester said businesses looking for fast, short-term funding should explore alternative funders. With Lulalend, you apply for funding online. If approved, the funds are in your account in 24 hours. And you only need a one-year trading history.

Who funds small businesses in South Africa?

Still unsure about which type of business funding is right for your business?

Here’s a roundup of the common business funders.

Government

Different government departments provide different types of funding. For instance, The Department of Trade and Industry and the Department of Small Business Development provide business funding.

You can get loans, grants, and sector-specific business funding from the government.

Below, is an overview of common government business funds.

SEFA

The Small Enterprise Finance Agency provides a range of business funding products, like asset finance, bridging finance, credit guarantees, and revolving loans.

The agency targets SMEs in the following sectors:

  • Tourism
  • Retail
  • Wholesale trade
  • Manufacturing
  • Agro-processing
  • Agriculture
  • Construction
  • Mining
  • Green industries

Some of the criteria include:

  • South African citizenship or permanent residency
  • Written business plan that meets Sefa’s criteria
  • Collateral

There will be additional criteria depending on the type of business funding. For instance, bridging finance is typically awarded to SMEs that have existing purchase orders.

Sefa might be a good place to start. If they can’t help you business funding, they’ll point you in the right direction.

You can take this quiz to learn more about the right funding for your business.

National Empowerment Fund

The National Empowerment Fund provides funding to black entrepreneurs.

Funds include:

  • Women empowerment fund
  • iMbewu fund
  • uMnotho Fund

For a full list of funds, visit the NEF’s product page.

The criteria for the NEF’s business funding includes that your business must be:

  • 50.1% black-owned
  • Able to create a “reasonable” amount of jobs
  • Able to repay the funding

Industrial Development Corporation

The Industrial Development Corporation (IDC) provides loans, venture capital, and other types of funding.

Focus sectors include:

  • Manufacturing
  • Clothing and textiles
  • Agriculture
  • Tourism
  • Mining

You may be asked for security.

For more, visit the IDC’s site.

Banks

In our business loan guide, we pulled together everything you need to know about applying for business loans.

Common criteria for business funding from banks include:

  • Security
  • Time of operating
  • Credit score
  • Financial documents, like cash flow statements

And if you’re curious about how your credit score affects your application, check out our credit score blog.

Alternative funders

Alternative funders, like Lulalend, offer a fast, easy way to access business finance. Unlike traditional lenders, you don’t need collateral. And, there are no early settlement fees.

Fast, easy business funding

If you want to learn more about accessing fast business online, visit our business funding page.

COVID-19 SME Support: R4 billion Business Funding Gap

COVID-19 SME Support: R4 billion Business Funding Gap

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South African SMEs asked government’s COVID-19 support scheme for over R4 billion to keep their doors open.

However, the Department of Small Business Development could only afford to award R513 million in the first round of its coronavirus SME support package.

Now, the department is working closely with the National Treasury to help SMEs survive the knock of the COVID-19 pandemic.

The funds were part of the department’s Debt Relief scheme. At the end of last month, the department announced the first phase of the scheme had closed.

The department provided a report of the scheme:

  • Total number of applications received – 35 865
  • Total number of valid applications received – 14 451
  • Total number of applications approved – 1 497

Those 1 497 SMEs will receive R513 million.

SMEs need R3,6 billion for salaries

The difference between the number of the total number of applications and the number of valid, complete applications is because 21 414 applications were incomplete. Those incomplete applications will be referred to the Small Enterprise Development Agency (SEDA). Then, SEDA will help small business owners complete their applications.

An assessment by the Small Enterprise Finance Agency (SEFA) found there was a funding shortfall of R4.4 billion during the first phase of this coronavirus business funding support.

SEFA identified the key reasons SMEs needed funds:

“The balance of the 12 954 complete applications requires an estimated budget of R4.4 billion but a bulk of the applications require assistance with payment of salaries to the total value of R3.6 billion,” reads the department’s statement.

To help SMEs pay salaries, the department has teamed up with the Unemployment Insurance Fund (UIF).

This means SMEs that did qualify for the UIF’s COVID-19 SME fund will now be able to access support to pay salaries. Many small businesses did not meet the requirements “due to non- compliance”, says the department. One example of non-compliance is that SMEs owned money to the UIF.  They must agree to pay that debt to the UIF before they access the COVID-19 salaries support.

There was another category of SMEs seeking funds: businesses that only needed some support to get back on their feet. This group of SMEs required R800 million.

“The DSBD will commence direct engagements with these SMMEs to ensure dedicated support for these enterprises to go back to business as President Ramaphosa has announced the gradual re-opening of the economy…The DBSD will continue to engage with National Treasury on this funding gap that is still required to fund those who have already applied.”

The Debt Relief scheme was opened in April to provide working capital to SMEs that were affected by COVID-19.

The COVID-19 support was for the following purposes:

  • Salaries
  • Rental
  • Municipal bills

The department said it would release the names of the business who had applied on 29 May. But at the time of publishing this post on 1 June, this list was not yet available.

New COVID-19 support initiatives

Meanwhile, the Minister of Small Business Development announced new COVID-19 support schemes.

Here is an overview of these sector-specific schemes:

  • Small-scale bakeries and confectioneries support scheme: small businesses can apply for equipment finance or working capital
  • Informal and small-scale clothing and textile support scheme: open to seamstresses, designers, art designers, shoemakers, etc. SMEs can use the funding for new business opportunities, courses to improve key skills, and business credit
  • Automotive aftermarkets support: open to all auto mechanics, diesel fitters, panel beaters and spray painters. Funds can be used for working capital

These schemes include business development services too, like trade tests. For more detail on the qualifying SMEs in each category, see the full press release here.

You can find application forms for these COVID-19 support schemes here.

 

6 Strategies Top Affiliates Use to Support SMEs During Covid-19

6 Strategies Top Affiliates Use to Support SMEs During Covid-19

Reading Time: 3 minutes

The coronavirus slowdown affects us all. But, it’s especially tough for South African business owners.

Every day we speak with business owners who are struggling. They’re worried about paying salaries and sustaining their SMEs in a post-coronavirus world.

In response, the government, private sector, and citizens have come together to offer support when small businesses need it most.

At Lulalend, we’re working hard to understand how to provide the services and support that matter to business owners right now. Our affiliate programme is an important part of this effort.

In this post, you will learn:

  • How to become a top Lulalend affiliate
  • How Lulalend affiliates help SMEs grow during difficult times

COVID-19 SME support: What are we doing at Lulalend?

To support SMEs during this difficult time, we have:

  • Continued to provide business funding
  • Set up a Facebook group for South African SMEs to connect and support each other
  • Created content that covers the latest on COVID-19 SME support
  • Lobbied for government and private sector to join forces to help SMEs

We also depend on affiliates like you.

As a Lulalend affiliate, you play an important role in our COVID-19 support programme.

If you’re a business advisor or an accountant, you are already giving SME owners valuable guidance about the future of their businesses. Now more than ever before, business owners depend on your advice to make decisions about their short-term financial futures.

As a Lulalend affiliate, you can also tell them about fast business funding.

How top affiliates support South African SMEs

Lucille Bester, Lulalend’s Head of Sales, shared practical strategies used by Lulalend’s most successful affiliates.

Bester said top affiliates made their customers aware about online funding and shared relevant business finance content with their clients.

Here’s a summary of the top points:

1. Share your referral link widely

A simple technique to spread the word about online funding is to share your referral link whenever you communicate with new customers.

Bester suggested the following tactics:

  • Add your link to your email signature
  • Create a website button to display your link prominently

2. Use customer data

Perhaps you’re a business consultant or an accountant. It’s your job to sort through your customer’s data to steer them in the right direction, added Bester.

In some sectors, SMEs are busier than ever because they deliver goods and services that are in high demand due to the outbreak.

“Maybe there’s a client who’s missing out on new contracts or opportunities because of cash flow. Here’s where you can support them to secure funding,” said Bester.

3. Ensuring a perfect match

Our top affiliates understand the minimum requirements, which include:

  • R500 000 minimum annual revenue
  • One year trading history

Unlike banks, we don’t ask business owners to submit stacks of paperwork.  All you need is three months of bank statements.

4. Teach your audience about business finance

Securing business funding can be a complex journey.

Your SME network can easily become overwhelmed with endless information from different sources.

“Your clients trust you. And they trust you to make ethical decisions in the interests of their businesses,” said Bester.

On top of connecting your clients with responsible funders, let your audience have access to content that serves their funding needs.

We’ve written about:

  • How to apply for a business loan in South Africa
  • The most common mistakes SMES make when they apply for loans
  • How fintech speeds up fintech funding

Our blog is updated weekly with new content tailored to help SMEs get the funding they need to grow. When you give business owners more information about the minimum requirements, they stand the best shot at accessing finance.

5. Subscribe to our communication channels

At Lulalend, we believe in the power of community.

That’s why we set up SA Small Business Unlocked.

Plus, we publish the latest news on SME funding on the Lulalend Facebook and Twitter channels.

Our weekly email updates SMEs about new promotions and useful content.

It’s not always hard to find the right funder for your needs. We create content that aims to help SMEs make the best decision for their business.

6. Write a Lulalend review

By writing an honest, helpful Lulalend review, you can expand your own network.

Your profile will be noticed in the search results. And review based on your real engagement with the company positions you as a trusted contact for SMEs searching for funding.

Connect South African SMEs with easy access to capital

Are you ready to spread the word about fast business funding?

As a Lulalend affiliate, you have the power to save SMEs. Together, we can expand access to finance for businesses throughout South Africa.