Applying for Coronavirus UIF Benefits? Here’s Everything Your SME Needs to Know

Applying for Coronavirus UIF Benefits? Here’s Everything Your SME Needs to Know

The Unemployment Insurance Fund has set aside R30 billion to help South African workers in distress due to the coronavirus.

If you’re a qualifying SME, your employees will get no less than R3,500 per month.

However, many business owners are struggling to access the relief.

More than 20,000 valid applications have been received, but only 136 have been processed, according to one news report. Business owners have taken to social media and newspaper columns to express their unhappiness with the process.

So, how do you access the UIF benefits for your business?

We spoke with Gerhard Papenfus, the Chief Executive of the National Employers Association of South Africa (NEASA), to gain a deeper understanding of the process.

Accessing the COVID-19 TERS benefits

The COVID-19 TERS (Temporary Employee Relief Scheme) is a relief package for employers, so you can pay staff salaries during the lockdown.

But a lack of clear information has been the biggest challenge SMEs face when trying to access the scheme, said Papenfus.

One part of the process includes completing a UIF Excel template. The employer must fill out their business details and each employee’s information. Before the document can be submitted, it must be converted to a CSV file. UIF Claims Commissioner Teboho Maruping told Moneyweb the bulk of applications for the relief were incomplete. Now, 23 000 employers will have to resubmit their applications.

To cover the information gap, NEASA, which represents 10,000 employers across South Africa, started publishing multiple updates to its website each day, releasing new information as it becomes available.

Papenpus explained that all employees who were “in employment on 27 March 2020 and who have suffered financial prejudice as a result of the lockdown” were eligible for the UIF benefits. This includes employees who are not South African citizens, provided they have a valid work permit.

The exact amount of the payments depended on their salaries.

“At this stage the benefit will be calculated on a sliding scale between 38% (for high earners) and 60% (for lower earners), calculated on the maximum salary cap of R17 712.00 per employee, per month.”

No worker will earn less than R3,500.

The process was different for SMEs with fewer than ten employees. For one, they do not need to sign a MOA.

“These funds will be paid out directly to the employees and not to the employer.”

However, these small businesses might struggle to recover advance payments, added Papenfus.

“UIF does not allow payment of the benefits to the employer where he employs 10 or less employees. Therefore, the employer cannot set-off these benefits against amounts advanced, which will make the employees hesitant to make advance payments in the first place.”

The UIF was set to make payments after 16 April, the date the lockdown was originally due to end.

“There will be payouts in tranches. Employers will have to apply for the first period of the initial lockdown and then again for the extended period.”

To speed up the process, the Department of Labour and the UIF launched an online platform, said Papenfus.

Looking forward, Papenfus encouraged business owners to think of life after the lockdown.

“If the employer envisages that reduction in staff or changes in conditions of employment will be required post lockdown, we advise to already start with this process during the lockdown period, as a section 189 process can be rather lengthy in nature.”

Frequently asked questions about the COVID-19 TERS benefit

NEASA has put together a COVID-19 TERS FAQ, based on the most common questions it has received from South African employers.

Here’s the summary of the key points.

Who can apply for the UIF’s COVID-19 TERS benefits?

SMEs need to be registered with the UIF to qualify. Your business doesn’t have to be in a complete shutdown for you to apply. Partial closures or any reductions in staff salaries due to COVID-19 are covered by the fund.

Which employees are eligible?

Any employee who was in employment on 27 March 2020 and who has suffered financial prejudice as a result of the lockdown. New employees who were set to start during the lockdown are also eligible.

How does COVID-19 TERS work?

Employees are paid on a sliding scale between 38% to 60% of their salaries. The lower the salary the higher the COVID-19 benefit. Companies apply on behalf of employees. No applications will be accepted once the lockdown is lifted.

How do I apply to COVID-19 TERS?

  1. Companies can email COVID19ters@labour.gov.za.
  2. You will receive an automated email response detailing the next steps in the process.
  3. Next, submit completed applications and supporting documents to Covid19UIF@labour.gov.za

Or, apply online on the UIF COVID-19 TERS Registration portal.

For more information, contact 012 337 1997.

Here is some of the information and paperwork you will need to to apply:

  • Letter of Authority, on an official company letterhead granting permission to an individual specified to lodge a claim on behalf of the company
  • MOA (completion of the agreement between UIF, Bargaining Council and Employer) · Prescribed template that will require critical information from the employer
  • Evidence/payroll as proof of last three months employee(s) salary(ies)
  • Confirmation of bank account details in the form of certified latest bank statement.

Will the scheme affect normal UIF benefits?

No, COVID-19 TERS benefits are not linked to normal benefits.

Do you need to send an invoice to the UIF?

No, this requirement has been removed.

How should employers register with a bargaining council claim? 

If you fall under a Bargaining Council, contact this organisation and find out whether or not they have finalised an agreement with the UIF. You may follow the relevant process with your Bargaining Council if they have reached an agreement with the UIF.

If no agreement has been concluded, or if one is still pending, you can claim directly from UIF on behalf of your employees.

What is included in remuneration for purposes of TERS? 

The amount an employee would normally earn and pay UIF on.

Can individuals claim TERS benefits? 

No, if an employer did not claim, the employee should ask them to claim. But if an employer still does not claim, the employees can claim normal UIF benefits for short-time or unemployment.

Where can I find more information on COVID-19 TERS?

For ongoing updates:

 

COVID-19 Support for South African SMEs: Do you Qualify for Tax Relief?

COVID-19 Support for South African SMEs: Do you Qualify for Tax Relief?

If you’re a South African SME, you can apply for the government’s COVID-19 tax relief.

As part of its coronavirus COVID-19 support for South African SMEs, the National Treasury has launched tax relief measures.

In this article, Lulalend’s team of finance experts explains how SMEs can qualify for:

  • Expanded Employment Tax Incentive rebates
  • Deferred tax payments (Provisional tax and PAYE)

Jump to our simple provisional tax calculator to estimate the amount of your deferred tax payments.

COVID-19 Tax relief package for South African businesses

On 23 March, President Cyril Ramaphosa announced a national lockdown to curb the spread of COVID-19. Since then, different government departments have introduced coronavirus support packages for SMEs. (Here’s an overview of COVID-19 SME support government funds you can access.)

The National Treasury outlined its tax relief scheme in the Draft Disaster Manager Tax Relief Bill, released on 1 April 2020. You can find more information about the bill on the National Treasury’s site.

The National Treasury explained the reasons for the SMME tax relief scheme in this memo:

“Small and medium sized businesses are the most vulnerable as they are unlikely to have cash reserves and are thus at a higher risk of shedding jobs under these conditions in an attempt to

remain going concerns and contain costs while generating very little income.”

In this article, we’ll cover the relief for SMMEs.

Expansion of Employment Tax Incentive

Under an additional tax subsidy, you may be able to claim an extra R500 per month for each employee, explained Quentin Daniel, Lulalend’s Head of Finance.

Daniel said the Treasury has added new criteria to give more SMEs access to the rebate.

“SMEs will also be able to claim monthly. Previously, you’d get ETI reimbursements twice a year. The goal is to increase cash flow.”

This one is only open to you if you were already registered with the Employment Tax Incentive programme as at 1 March 2020, said Daniel.

The existing ETI lets companies claim a rebate for employees who meet the following criteria:

  • Between 19 years old and 29 years old;
  • Earns less than R6,500 per month

It’s a two-year incentive for companies to hire more young people. Companies qualify for a R1,000 rebate per month for the first year, and the next year, the incentive drops to R500.

The new subsidy will support 4 million workers, according to the Ministry of Finance.

Here’s a breakdown of the expanded ETI benefits:

EmployeeCurrent ETI benefit
COVID-19 ETI benefitTotal
Employees who currently in ETI first yearR1000R500R1,500
Employees who currently in ETI second yearR500R500R1,000
Employees where ETI claims have been exhaustedR0R500R500
Employees between 30 years and 65 years who have never been eligibleR0R500R500

Deferred tax payments (Provisional tax and PAYE)

Do you qualify for deferred tax payments?

Any SME with an annual turnover of less than R100 million can defer their provisional tax and PAYE payments over the next four months, said Bernice du Toit, Lulalend Financial Accountant.

Du Toit explained:

“You’ll only pay a portion of your tax liability, and you won’t have to pay any penalties or interest when you pay the balance.”

Provisional tax

Here’s how this will affect your provisional tax payments:

  1. You can pay 15% of your total estimated taxable income for the tax year for your first payment. This is due from 1 April 2020 to 30 September 2020.
  2. You can pay 15%% of your tax payment for the second provisional tax payment. This is due between 1 April 2020 and 31 March 2021.

“To avoid interest, SMEs must pay the full tax liability, which comes to 35 in total, when they make their third provisional tax payment,” said Du Toit.

To qualify, SMEs must:

  • Have a gross income of R100 million or less
  • Be fully tax compliant

Here’s an example calculation from the National Treasury:

Provisional tax relief calculator for SMEs

Try our simple provisional tax relief calculator to estimate your payments.

PAYE

You can also defer 35% of your PAYE payments without any penalties.

Daniel said SMES can defer their PAYE liability, starting with the payment due on 7 May 2020 and ending with the payment due on 7 August 2020.

“SMEs will need to pay the deferred tax liability to SARS in equal instalments over six months. The first payment must be made on 7 September 2020,” added Daniel.

The Ministry of Finance estimates this initiative will assist 75 000 SMMEs.

Additional tax measures

On 22 April, President Cyril Ramaphosa announced additional tax measures, including:

  • Four-month holiday for skills development levies
  • Fast-tracking VAT refunds
  • Three-month delay for filing and first payment of carbon tax

COVID-19 support resource for SMEs

For more information, here are a few resources

Editor’s note: This post was originally published on 6 April 2020 and has been updated based on new measures.

Coronavirus Support for South African SMEs: List of Government Funds

Coronavirus Support for South African SMEs: List of Government Funds

Are you struggling with the impact of COVID-19 on your SME?

You’re not alone.

South African SMEs will be hit hard by the 21-day lockdown needed to curb the country’s coronavirus outbreak.

In response, the government has announced a SME support package to keep businesses going during this difficult time.

Ebrahim Patel, the Minister of Trade, Industry, and Competition, said the government hoped to come through the lockdown with as “little damage” as possible.

“Across the world, more countries are now doing lockdowns and we want to ensure that it is managed in strong partnership with our people, with large and small businesses, with workers and with consumers.”

Different government departments are providing funding.

In this article, we’re covering the key funds you need to know about, including:

  • Department of Small Business Development’s COVID-19 finance relief schemes
  • Department of Tourism’s support for tourism businesses
  • Department of Labour/Unemployment Insurance Funds support for employees

Department of Small Business Development’s coronavirus SME support

The Department of Small Business Development is leading the government’s SME support effort. It is working with the Small Enterprise Finance Agency (Sefa) and the Small Enterprise Development Agency (Seda).

Here’s an infographic outlining the different support you can access:

Business Growth and Resilience Facility

In this briefing, Khumbudzo Ntshavheni, the Minister of Small Business Development, discussed government’s support for SMEs during the 21-day lockdown. (Ntshavheni’s address starts at 1:44’ mark.)

The Business Growth and Resilience Facility seeks to help manufacturing SMEs, with a focus on that those can provide high-demand products during the outbreak.

“(We want to give) Give local manufacturers and suppliers an opportunity to produce the medical and hygiene supplies to respond to the crisis,” said Ntshavheni.

Companies in the agri-processing sector will also be supported, added Ntshavheni.

The fund will provide working capital, bridging finance, equipment finance, and order finance, reports CNBC Africa.

Here’s the criteria:

  • 100% SA owned
  • Employ at least 70% South African staff
  • SARS complaint

If SMEs are not registered and tax compliant, the department will help business owners with that process.

Priority will be given to women, youth, and people with disabilities.

Here is the process:

  1. Register on https://smmesa.gov.za/
  2. Complete application form
  3. Attach supporting documents
  4. Send to bizgrowth@sefa.org.za

SMME Debt Relief Scheme

If you’re struggling to keep up with your financial obligations, consider the SMME Relief Scheme.

This fund will provide loans so SMEs can buy raw material, pay salaries, and cover operational costs.

Like the Business Growth and Resilience Facility, qualifying SMEs must be 100% South African owned; 70% of the staff must be South African.

You can apply for both the SMME Relief Scheme and the Business Growth and Resilience Facility at https://smmesa.gov.za/

Here is the application process:

  1. Register on https://smmesa.gov.za/
  2. Complete application form
  3. Gather supporting documents
  4. Complete and send to smmerelief@sefa.org.za

Support for tourism businesses

Tourism businesses have taken a knock during the COVID-19 outbreak. Even before the shutdown, PwC predicted a R200m reduction in tourism spend.

To support these companies, the Department of Tourism has allocated R200 million to “cushion our society from economic difficulties”, according to this statement.

The qualifying criteria includes:

  • Turnover must not exceed R2.5m
  • Must be trading for at least one year
  • Should be able to show a link between COVID-19 and business distress

Financial support for employees

For companies battling to pay salaries during the lockdown period, staff will be eligible for government support.

The Unemployment Insurance Fund (UIF) has set up the Covid-19 Temporary Employer-Employee Relief Scheme (COVID-19 TERS).

“Caring and responsible employers that are unable to pay the full salaries of the workers they send home for their health and safety due to the lockdown are encouraged to apply for the Covid-19 TERS  Benefit from the UIF,” reads a statement a joint statement from the UIF and the Department of Labour.

Send an email to covid19ters@labour.gov.za to apply.

Here is a document on COVID-19 TERS from the Department of Labour, which explains:

  • Background of the scheme
  • Submission process
  • Supporting documents required

Application guidelines for coronavirus assistance to South African SMEs

Here is a breakdown of the supporting documents you need to apply for government funding.

FundsSupporting documents Key contacts
Debt relief finance scheme Company statutory Documents;
FICA documents (e.g. municipal accounts)
Certified ID copies of Directors;
3 months bank statements;
Latest annual financial statements / Latest management accounts;
Business profile;
6 months cash flow projections (where applicable);
Copy of lease agreement or proof of ownership if applying for rental relief
Employee details (bank details and UIF) for help paying salaries
debtrelief@seda.org.za
Business Growth and Resilience Facility CIPC registration documents;
FICA documents (e.g. municipal accounts);
ID Copies of directors/ members;
3 months bank statements;
Latest annual financial statements /management accounts;
Business profile;
6 months cash flow projections (where applicable);
Industry certification (where applicable);
Estimations for funding requested
growthfund@seda.org.za
COVID-19 TERSLetter of authority: letter on a company letterhead giving an individual permission to lodge claim
Agreement between the employer, bargaining council, and UIF
Template from the UIF with relevant information from employer
Last three months payroll
Certified latest bank statements
012 337 1997 /covid19ters@labour.gov.za

 

8 Cost-Reduction Strategies to Improve Your SME’s Cashflow

8 Cost-Reduction Strategies to Improve Your SME’s Cashflow

As a business owner, you’re always looking for ways to reduce costs.

Of course, cutting costs helps you boost your cash flow. And when you’re running a business, you know cash flow matters. Local business owners tell us steady cash flow means their businesses can thrive. Negative cash flow, on the other hand, causes missed opportunities and immense personal stress.

The good news: there’s quick steps to improve your cash flow and reduce your costs; simple strategies you can start using right away.

In this article, Lulalend’s team of accounting and finance experts shares practical tips to help you take control of your cash flow and better manage your business finances.

Here’s a quick summary:

  1. Review your business finances
  2. Always ask for supplier discounts
  3. Don’t overstock
  4. Compare quotes
  5. Save on your business finance
  6. Reduce advertising costs
  7. Embrace technology and automation 
  8. Pay your taxes on time 

1. Review your business finances

When was the last time you reviewed your business finances?

Research suggests that cash flow management education should be a key priority for SMEs. But studies into newer businesses, in particular, found few processes for financial planning and control. 

Improving your cash flow management begins with an understanding of your business’s financials.

Evaluate your expenses and ask:

  • Do I need all of these services?
  • Are there cheaper alternatives?

Carvin Gordon, Lulalend Financial Accountant, said:

“Review your monthly expenses and negotiate with institutions for a possible reduction in expenses, such as insurance, for example. Insurance institutions are always willing to negotiate better rates.” 

Another option is to consolidate policies or accounts. 

Study retainer or consult fees as well, added Quentin Daniel, Lulalend’s Head of Finance. 

You might find you’re not using—or getting any real business value—from these services. 

2. Always ask for supplier discounts 

Getting a great deal on your supplies makes a massive difference to your bottom line. 

By asking for supplier discounts, you can quickly reduce your costs, said Daniel.

Many suppliers will have a lower per-unit price the more you buy, and others offer early payment discounts. 

Ask your supplier if you’re not sure. If you’re a long-time buyer, your vendor is more likely to consider offering you a discount even if it’s not explicitly stated. 

Even if these savings appear small, they’ll add up in the long term. 

3. Don’t overstock 

Buying in bulk can help you cut costs…but that’s not always the case. 

You could also end up losing money, said Bernice du Toit, Financial Accountant at Lulalend. 

“Some companies tend to over-stock on inventory, not taking into account the storage cost of these goods or the possibility that stock may go obsolete.” 

Du Toit said:

“Inventory is also tied-up cash flow that could have potentially been used more effectively in a different manner. Businesses should try to keep as little stock on hand and only bulk order if a discount is offered and the entity is sure that goods will be sold.”

4. Compare quotes

When you’re shopping for a new supplier, compare quotes.

Putting in the time to do a price comparison might net you a better deal.

Once you receive your invoice, compare it against your initial quote, said Daniel.

“Always double-check invoices from suppliers and price of quote vs billing. Always question items (for clarity).”

5. Save on your business finance 

Another way to reduce costs is to be strategic in your approach to business finance.

You might consider funding to boost your cash flow. But if you want to pay back the loan early, it might end up costing you more. Some funders charge hefty early repayment penalties. 

Look for business funding like Lulalend that lets you settle early, free of charge. 

6. Reduce advertising costs

As an SME, you might not have a huge advertising budget.

Fortunately, you don’t need one to reach your customers.

Here’s some tips small business marketing tips:

  • Clearly define your target audience
  • Understand their pain points
  • Create content and offers that address those pain points
  • Consider a Facebook marketing plan; you’ll get detailed targeting at affordable rates
  • Build your own email list 

Remember to focus your marketing efforts on your ideal customers to get the best results.

For more on marketing tips, check out our series here

Probably one of the most effective ways to drum up new business is keep your existing customers happy, adds Gordon.

“Business owners should focus on quality over quantity. A lot of the time you push to get jobs done at the expense of quality. Quality will ensure repeat customers, brand building, and word-of-mouth referrals.”

7. Embrace technology and automation 

There’s some truth to the old saying, “Time is money.”

This is especially relevant for SMEs. 

Consider how much time you and your team spend doing manual, repetitive tasks. 

Try cloud applications to save time on routine tasks, e.g.: 

  • Social media scheduling, like Buffer or Hootsuite 
  • Document management and signatures, with applications like Docusign
  • Accounting, like Quickbooks and Xero

By using technology, you’ll free up more time for meaningful work; the kind of work that will add real value to your business.

And though we’re big believers in the power of these kinds of applications, only pay for what you use. 

“Review annual subscriptions that you don’t use, i.e., you’ve been dragged into subscribing for software but don’t actually use it,” added Daniel.

8. Pay your taxes on time 

Many business owners dread tax season. 

On average, each South African business spends R63 328 and 255 hours annually complying with tax regulations, suggests this international research project.

Still, when it comes to your tax, pay the right amount, on time. 

Here’s more tips on how to save on your SMEs tax bill. 

Boost Your Business Cash flow with Flexible Business Finance

If you’re in a cash flow crunch right now, consider short-term business finance with Lulalend. You apply online in minutes and get the cash in your account 24 hours later. 

 

Coronavirus: Here’s how South African SMEs are hit

Coronavirus: Here’s how South African SMEs are hit

South African business owners are bracing for the potentially devastating impact of the coronavirus outbreak.

Carel Hauptfleisch, who runs a successful online retail store out of Cape Town, imports goods from China. He’s been unable to get new products from his usual suppliers since the coronavirus hit.

“Stock has been paid for, but it’s not coming in,” said Hauptfleisch.

A similar story is unfolding across South Africa.

Cash flow is under pressure

Trade links with China run deep: the viral disease is hurting the South African economy, from large firms to SMEs. Since the onset of the coronavirus in December, most Chinese factories have slowed production, or shut down completely.

Prolonged factory closures are a serious concern for SMEs who import goods from China, said Kayla Field, of the Lulalend credit team.

Field has been speaking with South African business owners over the past few weeks.

Local SMEs are struggling, said Field.

“Businesses have placed bulk orders six months in advance. They’ve already paid for these orders. But because of the virus, they can’t access that stock.”

Declining stock means declining sales, said Field.

“Cash flow becomes an issue. Businesses don’t always have capital to purchase new stock from alternative suppliers.”

Most SMEs are on edge.

“All businesses are left with is the stock they have. They’re quickly running out of the materials they need to do business.”

Hauptfleisch tells us he’s tapped into other networks.

“We are sourcing from alternative suppliers. They have limited supply.”

He remains in regular contact with his manufacturers in China.

“Some of my suppliers are getting back to work, but their suppliers are still shut down.”

Even when operations finally return to normal levels, the effects of the outbreak will stay with many businesses for a few months, adds Hauptfleisch.

Epidemic threatens jobs, growth

Many factories did not resume production after the Lunar New Year holiday, reports the Financial Times.

“With many workers…quarantined at home and supply lines affected, many factories are struggling to reopen or regain full capacity,” states the World Economic Forum.

In South Africa, almost no sector remains untouched, explained Field:

  • Mobile sales: cellphones and cellphone accessories.
  • Automotive industry: China is the world’s largest car market, according to Statistia. Wuhan, where the first case of the virus was detected, is known as a “motor city”, because it’s home to several large car manufacturing plants.
  • Retail: like companies across the globe, many SA retailers are reliant on China for stock.
  • Hospitality: around 100 000 Chinese tourists visit South Africa each year. A PwC report estimates the coronavirus will cause losses of R200 million in the tourism industry.
  • Construction: businesses import steel and concrete from China. Construction projects are stalling because of shipment delays, reports IOL.

SMEs in these sectors have been hit hard.

“Many businesses owners I speak to are worried,” said Field.

“There’s no timeline around this. Businesses are taking a knock.”

The impact of coronavirus on business finance

In some cases, business owners have been struggling to repay their business loans.

“Here’s where lenders need to be sensitive to what people are going through,” said Field.

Though, SMEs should take a proactive approach when it comes to managing their business finance obligations.

“Once you realise you will struggle to make your repayments, contact your lender immediately to make an arrangement,”, said Field.

By taking this route, business owners can avoid defaults or judgements against their name, added Field.

What’s a good credit score for a business loan?

What’s a good credit score for a business loan?

Is your credit score holding you back from getting a business loan?

When you apply for business finance, you want to show funders you’re willing—and able—to repay the loan. And they check your credit score, along with other financial information, to determine your risk.

But there’s more to the story when it comes to credit scores and business loans.

In this article, Lulalend’s team of credit risk experts share practical strategies for improving your credit rating right away.

Plus, you’ll learn how to get a business loan, even if you’re a relatively young business with a limited credit history.

Key points:

  • To improve your score, pay your accounts on time and don’t apply for too much credit at once
  • Avoid defaults on your account; make payment arrangements with lenders instead
  • Fintech funders use alternative data, in addition to looking at credit scores
  • Review your rating periodically: you get one free credit report each year

What is a credit score?

Your credit score is a three-digit number that represents your creditworthiness. Lenders use this figure to predict your ability to repay your loan.

As a rule, higher scores mean lower risk.

Your personal credit score is unique to you and is influenced by a few factors, including:

  • Your current debt
  • Your payment history
  • Length of payment history

Of these, paying your debt on time is one of the best things you do to build a strong personal credit rating, said Taryn Crouster, Senior Credit Analyst at Lulalend.

Based on these factors, you will be assigned a score by the credit bureaus.

What’s a good credit score for a business loan?

For business loans, lenders evaluate both your personal and business credit profiles.

Even though your personal credit score is only one of several factors lenders consider, a poor personal credit rating might hurt your business loan application.

(In our business loan guide, we dig into deeper detail about personal and business creditworthiness.)

Each bureau has a different way of calculating your credit score, but here’s a general guide to personal credit ratings:

  • 700+: the best rating you can achieve
  • 660+: a good credit rating
  • 620 to 659: you might struggle to get a business loan
  • Below 620: most lenders will see this kind of score as high-risk

For a long time, your credit score could mean the difference between your business loan application being approved or rejected. Lenders wanted a track record of repayments before approving your application.

But what if you don’t have any, or a limited, credit history?

Garth Rossiter, Chief Risk Officer at Lulalend, said fintech funders reviewed alternative data sources.

“We assess the applicant’s ability to repay and the willingness to repay. And we use a number of data points, in addition to credit scores, to make decisions.”

Tips for improving your credit score when you apply for a business loan

If you want to give yourself the best shot at building a positive credit rating, try these practical tips.

Avoid defaults

You should always aim to make your payments on time, consistently.

But what if you’ve hit a particularly rough patch?

Maybe it’s a seasonal slump. Perhaps your business is struggling because of unexpected threats in the global economy.

At some stage, most SME owners have experienced these kinds of challenges. Those are difficult, stressful situations And it’s tempting to take cover until the storm passes. But late or missed payments will work against you, said Crouster.

However, a proactive approach makes all the difference.

“If you’re in a situation where you can’t make your payments, let the creditor know beforehand. You’ll be able to make an arrangement, which is far better than a default listing on your credit report.”

Pay SARS

Unpaid taxes will drag your credit score down, explained Lindiswa Tyhali, Senior Credit Analyst at Lulalend.

And trying to dodge the South African Revenue Service (Sars) could end up damaging your financial profile.

For instance, SARS could issue a court judgement against your name. Once that happens, it’s public information that shows up on your credit profile for years.

Business owners pay a provisional tax twice a year. Here’s an article with tips to save money and time when paying your tax.

Avoid bad debt

Paying off debt establishes a positive credit history. So, some debt is necessary. But there are types of debt to avoid.

Tyhali said short-term loans that fall under the National Loan Register (NLR) are considered bad debt, because they indicate to lenders that you might be having cash flow issues.

Limit credit applications

Each time you apply for credit, you’re giving the lender permission to pull your credit report.

These inquiries stay on your profile. Beyond that, each query reduces your credit score by a single point.

Don’t open too many new accounts

Racking up large amounts of credit quickly is a red flag, said Crouster:

“Taking too much debt over a short period of time might be a sign you’re struggling financially.”

How to get your free credit score

Are you ready to improve your credit score?

If you haven’t already checked your credit rating this year, that’s a great place to start.

You get one free credit report per year.

Here are popular credit bureaus :

If you’re after fast, easy business funding, consider a fintech funder like Lulalend. We base our credit decisions on the real-time performance of your business, instead of relying mainly on credit scores.