The battle for SMME funding

If SMMEs are the key to economic growth, why are they battling to secure funding?

While the failure rate of small businesses in the country is high, they remain the backbone of the economy, providing the majority of the job opportunities and contributing significantly to GDP. With the recent announcement of government job cuts over the next three years – and with only 22% of corporate CEOs being “very confident” of their company’s growth in the next 12 months – the country is depending on the small business sector to deliver jobs.

To achieve this, a supportive environment must be created to bolster small business survival and to facilitate growth. Access to finance is a critical component of this survival and growth and is one that needs urgent attention.

Finfind published South Africa’s Inaugural SMME Access to Finance Report last year. The report, sponsored by the SA SME Fund, details the SMME access to finance landscape in the country and identifies the lack of skills by micro, small and medium-sized business owners as a substantial challenge to accessing finance.

A free copy of the report can be downloaded from

“Many business owners lack the skills required to find the right funders and to identify the appropriate finance product that matches their particular funding need,” says Darlene Menzies, CEO of Finfind. “Many also struggle to prepare the relevant business documentation required by finance providers and lack the know-how to ideally present their business funding case in a way that will enable them to access the finance they need.

“While access to the funding is crucial for business sustainability and growth, sadly many applications are rejected due to poor financial skills and lack of funding experience by the business owner,” adds Menzies.

The report suggests that there is a need to raise the skills level of many of the startup and early-stage businesses, to equip them to build companies that:

  • Are better managed
  • Have viable business models
  • Maintain up-to-date financial records
  • Understand how to manage their cash flow
  • Can articulate their funding need
  • Can prepare a business plan that is properly positioned for funding
  • Can develop the trading history and track record necessary to secure funding

“Funders need to determine that the business applying for finance is bankable, meaning that it is a viable business that is going to generate future income,” adds Menzies. “Funders also have to assess that the business can afford the funding so that it will be able to repay the money it is applying for. To do this, the funder needs to examine documents such as the SMME’s business plan or project plans, their income projections, outstanding debtors, latest annual financial statements, latest VAT statements, up-to-date management accounts and latest bank statements.

Stay on top of your business cash flow management so you apply for funding a few months before they actually need it, as opposed to when you hit a cash cliff.

“Many business owners struggle to provide these documents as they find the financial recordkeeping side of their business challenging and do not have access to the necessary financial management and accounting resources needed to produce these vital documents. Poor financial recordkeeping and the lack of up-to-date financials is not only a problem when it comes to applying for funding but is also a major hindrance when it comes to owners making sound business decisions.”

To improve their chances of securing funding, some of the things business owners must focus on include:

  • Ensuring that they have a viable business model
  • Knowing what their personal credit score is and making sure that they address any outstanding unpaid issues
  • Being vigilant about settling monthly credit repayments on time – many funders will reject an SMME’s application for finance if the owners have bad credit scores  
  • Keeping their business admin and financial recordkeeping up to date
  • Staying on top of their business cash flow management so they apply for funding a few months before they actually need it, as opposed to when they have already hit a cash cliff
  • Being able to properly articulate their funding needs
  • Maintaining a good business trading history
  • Ensuring access to an accredited small business accountant to assist with financial management, signing off of financial statements and to provide sound tax advice

There is a definite disconnect in the industry between the amount of money available to SMMEs from funders, and the number of SMMEs successfully securing these funds. There are over 200 funders with more than 500 different finance products available for SMMEs.

“Business owners need to upskill themselves and get the basics in place and funding will become easier. Very few funders offer support to become funding ready, the onus is on the business owner to properly prepare their application and their supporting documents and present their case to the funder.

“Business owners are advised to seek assistance from small business accountants and business advisors when it comes to preparing and submitting funding requests. To find out which funders and finance products they should apply for, they simply need to go to the Finfind website (,” concludes Menzies.