Open For Business Campaign – SMME Support

Open For Business Campaign – SMME Support

A new countrywide SME support campaign will offer small businesses free marketing exposure, financial management tools, and support to digitally transform their business as they attempt to re-open following the COVID-19 pandemic lockdown.

As a growing number of small businesses begin to shift online to meet changing customer behaviour resulting from COVID-19, Lulalend, SA’s first online funder for SMEs, has launched its Open for Business campaign.

The campaign will provide:

  • Marketing support: including exposure across Lulalend’s high profile digital platforms
  • Digital capability assessment: free audit by Lulalend’s digital marketing experts
  • Access to cash flow forecasting tools: a snapshot of an SME’s short-term financial future
  • Mentorship: connect over lunch with an inspiring mentor from your industry

The free marketing support will promote SMEs on Lulalend’s blog to help increase their exposure and improve vital search engine rankings. Businesses will also be promoted across Lulalend’s social media platforms under the Open for Business banner.

The campaign comes as internet traffic has continued to rise by 15% since President Cyril Ramaphohsa announced the lockdown in March, according to Seacom, the network service provider. These increases have included hikes in video consumption and standard web browsing.

A study from Nielsen also showed 29% of people were shopping more online since the start of the outbreak.

Michael Rampjapedi, digital marketing manager at Lulalend, said SMEs featured on Lulalend’s blog will be able to grow traffic to their sites.

“The most important benefit is the visibility, especially for a new site. You’re getting free traffic to your site. And that’s immediate, cost-effective, exposure.”

Rampjapedi said there will also be long-term benefits for a business’ search engine ranking.

Linking to the Lulalend site improves a new site’s domain authority: a group of factors that influence a site’s ranking.

“The Lulalend blog’s domain authority is similar to that of the banks. So, having those kinds of associating links is beneficial for a new site’s authority,” said Michael Rampjapedi.

Meanwhile, Lulalend’s cash flow forecasting tool will allow an SME to view a monthly breakdown of it’s expected turnover and estimated expenses for the next six months.

The Open for Business campaign will also be regularly providing valuable content to help businesses operate effectively during the pandemic, such as this Back to Business guide.

The guide, which was produced in partnership with the National Small Business Chamber, covers topics including:

  • Marketing your SME during COVID-19
  • Increasing your cashflow
  • Communicating with your team

Within Lulalend’s SME community there have been many stories of entrepreneurs adapting their businesses overnight and finding new ways of doing things to cope with the impact of COVID-19. Lulalend is offering business owners the chance to meet and learn from these inspiring individuals.

SMEs can list their businesses here.

And can stay up to date on the campaign by subscribing to the Lulalend newsletter here.

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

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 Guide: How to Grow During a Crisis

COVID-19 SME Support Guide: How to Grow During a Crisis

Are you unsure about how to run your business during COVID-19?

You aren’t alone.

Business owners tell us they’re feeling uncertain about the future.

That’s why we partnered with the National Small Business Chamber (NSBC) to create this Back to Business guide for South African SMEs.

You’ll find a collection of resources that will help you:

  • Develop a COVID-19 workplace plan
  • Boost your cashflow
  • Communicate with staff and customers
  • Market your SME during COVID-19

This guide is part of our Open for Business campaign, an initiative to help get your business again thriving during COVID-19.

For the full guide, click here. 

Open for Business will be supporting your business growth with:

  • Tools to help you assess and forecast your business trajectory
  • Content and guides to upskill and empower you
  • Extra marketing support from our in house team
  • Fast and flexible access to business funding

For more on the Open for Business campaign, read this blog post

Want to increase your marketing? Submit your SME to our Open for Business listing. It’s free and takes only a few minutes. Add your business here.

Still need help getting back to business?

Here are a few Open for Business articles that might help you:

COVID-19 SME Support: R4 billion Business Funding Gap

COVID-19 SME Support: R4 billion Business Funding Gap

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.

 

COVID-19 SME Support: Is the R100bn Scheme Right for Your SME?

COVID-19 SME Support: Is the R100bn Scheme Right for Your SME?

Small businesses can now apply for the government’s R100 billion COVID-19 loan guarantee scheme.

If your turnover is less than R300 million, you qualify for this COVID-19 SME support programme.

It is a joint initiative by the National Treasury and the banks. The South African Reserve Bank will manage the scheme and release annual reports revealing how much funds each bank has issued to SMEs under the scheme. This report will include default rates.

On 12 May, the National Treasury, the Banking Association of South Africa, and the South African Reserve Bank, released a joint media statement about the COVID-19 support scheme.

“Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, etc. Government and commercial banks are sharing the risks of these loans,” reads the statement.

Does your SME qualify for the scheme?

To qualify, small businesses must meet the following criteria:

  • Existing relationship with the bank
  • Good standing with their bank, e.g., up to date with other loan payments
  • Good standing with SARS
  • Must be in financial distress because of COVID-19

Loans will be released in three installments. SMEs get five years to pay off the loan, and banks may ask for collateral, according to a FAQ about the scheme.

Other conditions include an interest rate fixed at the repo rate plus 3.5%. Banks cannot change this rate;

“Businesses may not use these loans to pay dividends, make investments, pay bonuses or pay off other loans that the business may have,” reads the FAQ.

COVID-19 SME funds update

The announcement comes after the National Department of Small Business said it was running out of funds for COVID-19 support.

Khumbudzo Ntshavheni, the Minister of Small Business Development, told MPs the R530 million the department has set aside for small business relief was not enough to meet the demand, reports Fin24.

“Our pot or kitty is too small…we are working with National Treasury to make sure more money in the scheme is available”.

On Twitter, many SMEs have expressed frustration with the process. Some say they have not received feedback on the status of their applications. The department said all business owners should have heard the outcome of the applications by 1 May.

The department publishes a progress report on the debt relief funds on its website,

These were the latest debt relief scheme figures available on 13 May:

  • Number of SMEs approved for funding: 1268
  • Approved amount: R 433m
  • Number of applications: 26039
  • Complete applications in progress (processed by SEFA): 6741
  • Incomplete applications resulting: 19298

Ntshavheni said the Unemployment Insurance Fund was helping to support SMEs.

The UIF released the following progress report on COVID-19 support:

  • R11-billion had been paid out over 2million workers
  • R100 million has been held back because the UIF can’t verify these workers bank details
  • R2 billion can’t be paid out because the UIF is still waiting for more details from companies

For more on accessing the government relief, read our simple guide on COVID-19 SME Relief options.

 

 

5 Ways to Rebuild Your SME During COVID-19

5 Ways to Rebuild Your SME During COVID-19

How do you even begin to rebuild your SME during COVID-19?

Some business owners have had weeks without turnover. Others are not sure when they can start trading again.

And even if you’re operating right now, you don’t know whether or not level 5 will force you to shut your doors in a few weeks.

Your fears are shared by thousands of SMEs.

Statistics South Africa asked business owner about the impact of COVID-19:

  • 85,4% reported turnover below normal
  • 46,4% reported temporary closure or paused trading
  • 30,6% said they can survive less than a month without any turnover
  • 54,0% can survive between one and three months

Covid-19 has changed everything about how we do business, and it’s not going away anytime soon.

So, we’ve gathered  advice from experts to help you forge a path in a new world.

1. Assess your situation

No business is untouched by the impact of COVID-19.

On an episode of CNBC Africa’s Business Tomorrow, Xolisa Nqodi, managing director of Shesha Tuks, said:

“It’s been really difficult for a small business like myself. We started seeing a negative impact on our operations since the last week of February. The last five weeks have not been easy for us…now that we are  starting our operations again it’s forced us to look at our business with a slightly different outlook.”

How has your business changed? Have a look at your SME right now, from profits to marketing budgets to staff.

2. Develop a two-year COVID-19 SME plan

Once you’ve completed an honest assessment of your SME, it’s time to get to the next step: preparing to run a business during the age of COVID-19.

On an episode of Business Day TV,  Pavlo Phitides, CEO of Aurik Business Accelerator, said SMEs needed to have a longer term view.

“The only thing we can be sure of is that Covid-19 is here to stay forever, and forever in a business life is two years. We’re going to be governed on the access of the economy based on the capacity of our health services to deal with the crisis as it unfolds and emerges…We will open the economy and close parts of it.”

Phitides said this was the only certainty.

“Hold onto that, it’s all that counts and forget everything else.”

To respond to these constant changes, business owners should come up with red, amber, and green strategies.

A red stage is a full lockdown.

“In the red stage, make sure you have staff who are able and capable to work remotely. If you can’t, the anxiety then rises. As the business owner, you are carrying the cost of that personnel, you are carrying the cost of the business.”

Another fact was that successful business practices before COVID-19 might no longer be effective.

“What led to your success coming  into COVID-19…will have to be very different from the way you will find success coming out of COVID-19.”

Phitides said this included practices, business leadership, and customer behaviour.

“The environment has changed, customers have experienced fundamentally different changes ..If you don’t adopt what you did and you do well in that new reality,  you could find yourself isolated from the opportunities that are going to emerge as we move out of lockdown into the new economy.”

3. Think about your next pivot carefully

When you’re coming up with ideas, it’s tempting to move into high-demand sectors.

But Nic Haralambous, serial entrepreneur, advises against this.

“If you weren’t already making masks, you’re probably not going to own the market for masks for the next 18 months. Stick to what you’re good at but try and evolve it.”

Haralambous was speaking with Business Day’s Michael Avery.

Study your industry. What are your competitors offering? What are the trends? What gaps can your business fill?

Maybe this means bringing a project forward, said Haralambous.

“What is the next thing you were going to do? What was on your development roadmap that you can bring forward to help accelerate the progress of your business because it is going on and off for the next two years.”

Haralambous suggested examining your existing skills.

“What tools do you have in your business that you can retool in different kinds of opportunities  that can generate revenue for you in the medium term?

“You need to be brutal with yourself. Be honest about your business survival opportunity…start retooling as quickly as you can.”

4. Determine your funding need

SMEs need billions of rands to keep their doors open.

More than 30% of businesses told Stats SA they had applied for government funding.

This week, the Minister of Small Business Development Khumbudzo Ntshavheni , told Parliament the department’s relief scheme was running out of the money, reports Fin24.

A good place to start is to determine your funding needs.

  • What does your cash flow look like over the next three to six months?
  • Do you need working capital to meet a backlog of orders?
  • Perhaps you need funding to fulfil a surge in demand?

5. Look after yourself

There’s a lot of uncertainty right now.

If you’re feeling worried and stressed, you’re not alone.

Personal development and business coach Charmaine Soobramoney has been helping SME owners navigate COVID-19.

“We all need to acknowledge that this is real, and it’s normal to go through the phase of anxiety. Lives have been impacted, the economy has been impacted, people are losing their jobs…People have reasons to feel anxious,” said Soobramoney in this video interview with Lulalend.

Soobramoney called on business owners to move towards accepting the new reality.

“This is the situation. Being anxious is not going to help me move forward in the way that I need to.”

She shared the mindset used by business owners who were finding traction:

“I’m in this situation. I have no control over it but I have control over how I choose to view my business , view the future, and grab opportunities that present itself.

“When you’re in this fearful state, you feel like the world is closing in. Yes, it is but you have control over how you open it.”

If you’re looking for fast access to funding, learn more about how Lulalend can help you grow. Click here for more information on how we work with business owners like you.