Getting funding can help you expand your business, but you need to get the right lender on board first. Picture: Freepik
Accessing the right funding and financing, at the right time, could mean the difference between your business starting up, staying open, or even shutting down.
This is according to Andiswa Bata, SME segment head at FNB who says that one of the biggest challenges for SMEs is getting the correct form of funding.
Bata said that businesses are still trying to find their financial footing in the country because the economy is facing a challenging business environment, with slow global growth, economic volatility, and ongoing power supply issues.
“This is especially true for small businesses, which play such an important role in the local economy. That’s where good credit comes in - as access to the right type of funding and finance can help SMEs grow, innovate, and create jobs,” Bata said.
Here are some practises that small business owners can adopt to enhance their applications to funders.
Many SMEs operate on a cash-only basis. The same cash is then used to pay suppliers and run the business without going into a business account.
Therefore, the bank cannot determine the true profitability of the business because cash has no paper trail.
The benefits of channelling cash and transactions through a business account include:
– accurate record keeping
– better financial management
– funders have an accurate forecast of revenue generated.
This is important for SMEs who often cannot afford to pay an accountant to produce audited financial statements. Bank statements or banking activity is often the verifiable digital track record that allows banks to make lending decisions.
Business owners need to keep their personal and business finances separate so they can determine the true financial performance of their business.
Having all business transactions in one place makes the process of keeping track of accounting records, income tax and audit requirements much easier.
Bata said: “To assist in receiving payments, there are many ways to get paid that are a great way to move from being cash-based to funds reflecting directly in your business account.”
Banking cash also ensures that business can operate safely without the risk of robberies, fraudulent cash transactions, and high cash handling fees.
Doing your business housekeeping includes maintaining FICA documentation, Sars, CIPC, and others.
Business owners should avoid arrears on existing debt and honour debit orders, even in your personal capacity as director of the business.
Taking care of these things will give confidence to any funder of your ability to honour your financial commitments.
“With the above in place, your business being profitable and you meeting the minimum acceptance criteria, there is no reason why your business should not receive funding,” Bata said.
IOL Business