The realities of obtaining funding in SA
Let’s be clear on one thing: raising money for your business is likely to be one of the hardest things you’ll ever have to do.
Financing is necessary to help the business owner set up and expand their operations, develop new products, and invest in new staff or production facilities. Many small businesses start out as an idea developed by one or two people who invest their own money, or turn to family and friends for financial help in return for a share in the business. Even if they are successful, there comes a time for all developing SMEs when they need new investment to expand or innovate further. That’s where they often run into problems, because they find it much harder than larger businesses to obtain financing from banks, investors or other credit providers. Putting aside the cost of borrowing money, the complexity of lending arrangements and the inflexibility of banks and major lenders, the fact is that it’s almost impossible to get a business loan. The credit squeeze is not a problem unique to South Africa. Research shows that as few as 3% of applicants worldwide are successful at securing a business loan.
Yet SMEs are the backbone of all economies and a key source of economic growth, dynamism and flexibility in both advanced industrialised countries, and in emerging and developing economies. SMEs constitute the dominant form of business organisation, accounting for over 95% and up to 99% of enterprises depending on the country. They are responsible for between 60% and 70% of job creation in many countries around the world. In addition, they are particularly important for bringing innovative products or techniques to the market. While not every small business turns into a multinational, they all face the same issue in their early days – finding the money to enable them to start and build up the business and test their product or service.
It’s much harder for them to borrow money from banks or to find private investors than for larger companies – and it’s unlikely the scenario is going to change anytime soon. It’s not going to become any easier to obtain the funding needed to start, grow and prosper, and thus contribute to creating jobs and economic growth. Why is it so difficult to obtain funding? Funding institutions are inundated with applications. What makes your business a better bet than thousands of others? Do you have a good credit record? Is your business plan appealing to an investor?
These are all key questions that you will have to answer. Remember, ideas are a dime a dozen – what will set your apart is the amount of preparation and research you put into your business plan, the skills you have available and your passion for the business. Your credit record is vitally important, so keep it clean. One of the most consistent reasons for the failure of an application is non-alignment of the business with the funding institution’s mandate. Don’t waste your time applying for funding for your asparagus farm from an organisation that does not finance agricultural activities. That’s just counterproductive.
What are the options?
Banks are risk averse, so they are unlikely to finance a start-up or very young firm without collateral. They also prefer to avoid businesses that offer the possibilities of high returns but at substantial risk of loss. They are far more likely to provide expansion capital for a business that has a healthy track record. Banks do however provide credit cards, overdrafts and home loan advances which can give you access to finance. If you’re considering private equity or venture capital, you must have a solid business case and a venture that is in line the organisation’s investment strategy. You will be required to demonstrate an ability to service the loan and associated fees and interest without subjecting your cash flow to undue stress.
Government funds are available through a variety of channels, all of which have to deliver on the mandate to advance black economic empowerment, women in business and job creation. How are you able to fulfil on these objectives? Do not make the mistake of expecting to be given cash. You will need to have a comprehensive business plan that is in line with the institution’s criteria. If you are unable to secure finance, you’ll have bootstrap and use your own resources. You may also be able to borrow money from friends and family. Be warned though – this option is only suitable for non-capital intensive businesses.
Never Give Up
Bear in mind that while raising finance is tough, it’s not impossible – provided you do the legwork. Andrew Honey, publisher of Entrepreneur, approached a total of 82 prospective financiers over a period of 11 months before launching the magazine in 2006. His tenacity and resolve certainly paid off. Read on to find out more about how to compile an application for finance that will set you on a pathway to success – and get you the cash!
Alternatives to Obtaining Funding
Many start-ups that are unsuccessful in obtaining capital because they have no track record or collateral end up bootstrapping – adjusting their business model and pulling themselves up by their own bootstraps, the owners launch the venture with as little as several thousand rands. They start small, often operating from home, and are cautious with their expenses, reinvesting money in the business as they go along. In this way, they develop a track record, which gives them a greater chance of securing funding into the future. Another option is to bring in a partner to share the burden of financing the business. As an entrepreneur, you also have access to “alternative capital”: energy and passion, knowledge and skills, time and effort, resilience and tenacity, networks and connection. Use it.
1. Government Funds | IDC
With small businesses playing an increasingly important role in SA’s economy the state has made several supportive funding vehicles available
State funds aim to promote economic growth and industrial development in South Africa, in recognition of the fact that a dynamic private sector creates employment and reduces poverty. There are several sources of funding available from the Industrial Development Corporation (IDC), all of which promote entrepreneurship through the building of competitive industries and enterprises based on sound business principles.
What are the key factors the IDC looks for in a successful plan?
- Proving the viability of the transaction, ability to meet all cash flow commitments (debt repayment, creditors and other cash expenses) and to generate a decent and acceptable return to the shareholders.
- Demonstrating that all aspects relating to a successful business have been considered (including human resources, marketing, finance, technical, production, and corporate governance and compliance issues).
- Demonstrating the ability and experience of managers and key staff to successfully implement and manage the business into the future.
- Basing all intentions and forecasts in the business plan on reasonable assumptions, supported with relevant documentation as far as possible.
- Documenting all information in the business plan. The business plan should be as complete as possible, and a stand-alone document.
What are some of the red flags that cause a plan to be rejected?
- Over-gearing of the business (too much debt resulting in significant doubt being placed on the business’s ability to repay debt and expenses and manage expenses).
- Insufficient experience of key management, which means they are unable to successfully manage and grow the business.
- Inability to justify various assumptions in the business plan, coupled with incomplete analysis of the market and failure to demonstrate how market share will be captured.
- Failure to deliver key outstanding agreements or requirements that are essential to the success of the plan, such as a major contract which does not materialise.
- Failure by owners to provide required security, such as personal suretyships.
- Non-compliance (legal, statutory, tax) for existing companies that wish to expand.
- What process do you follow in evaluating plans in your organisation?
- There are two major processes:
1. Basic Assessment
This phase involves a desktop study of the business plan and constant liaison between the client and the IDC on formulating and tailoring the plan so that all requirements are met. A high-level review of financial viability and other key areas (such as human resources, technical knowledge and compliance) is also conducted at this stage.
2. Due Diligence
Subject to the successful completion of a basic assessment, this phase involves a more in-depth analysis of the business requirements based on the business plan and basic assessment. A team is assigned to conduct a due diligence which involves spending time onsite and engaging key role players such as shareholders, management, builders/professional team, equipment suppliers, existing and new customers and employees.
2. Social Development Funds | Masiszane
If your business is a development initiative that will contribute to SA’s growth, you can apply for social development funding
Social development funders aim to make a meaningful investment in shared growth by supporting people who were previously excluded from participating in the country’s economy.
Old Mutual’s Masisizane fund is investing R400 million in enterprise development, with a focus on women-owned businesses, capacity building and skills development, and financial education. Entrepreneur quizzed Masisizane’s CEO Charmaine Groves about her views on the make or break factors when it comes to applying for funding.
Who succeeds in obtaining funding from your organisation?
We look for entrepreneurs who have:
- Passion for the business demonstrated in the plan and in face-to-face interaction
- Commitment demonstrated by own capital investment into the business
- Capacity to accept constructive advice/criticism, and the ability to analyse input carefully before reacting
- Good credit rating
- Understanding of the consumer and product
- Focus on market diversification, not product diversification
- Product that meets a specific market need
- Product that meets the market’s quality standards and displays a competitive edge
What are the key factors you look for in a successful plan?
- A history of trading (at least three years) and consumer demand for the product
- Up-to-date financials and realistic projections that present a viable business as a going concern (if it’s an existing business)
- Comfortable profit margins, shown by realistic projections, to absorb loan repayments
- Demonstrated regulatory compliance (tax affairs must be in order, for example)
- Must address health and safety issues and protection of the environment
- Must address both the raw material supply and product demand aspects
- Must demonstrate a pragmatic and proven approach to getting the product to market
- The business must be able to secure and/or create jobs – our target is to create, on average, one job for every R100 000 loan
- Must demonstrate the empowerment of black people and women
- Must meet the other Masisizane fund criteria
What are some of the red flags that cause a plan to be rejected?
- The business owners are not actively involved in the business
- The market for the product is clearly saturated or non-existent
- The product quality will not meet the market requirements – this could lead to deferral of funding while the product quality is improved
- The business is not or will not become viable in the medium- to long-term (no demand or no raw material supply)
What process do you follow in evaluating business plans?
- Evaluate against the fund’s criteria
- Evaluate the viability of the business idea, the product, markets, management and technical ability, the legal matters
- Conduct a site visit to gain a better understanding of the business and confirm the facts in the business plan
- Scrutinise the financials, check how realistic projections are, and calculate ratios to determine long-term viability and ability to repay the loan
- Check credit standing
- Motivate financing to credit committee
- Fulfil National Credit Act requirements if approved by the credit committee
- Call +27 11 217 1854
- Visit www.oldmutual.co.za
3. Banks | Nedbank
There are a number of different loan types available from banks, but the criteria are rigorous and you will need some collateral
It is notoriously difficult to secure funding from banks. Before you apply, make sure you have a good credit history and rating, strong financials that are consistent with your credit history, a verifiable income and profit, and sufficient assets to use as collateral.
According to Sibongiseni Ngundze, managing executive of Nedbank Small Business Services, applicants looking for bank funding must demonstrate a good understanding of the business they wish to embark on and importantly, their plan has to be realistic and achievable. “Applicants should use clear and simple language in their applications and business plans,” adds Ngundze. “Included therein should be a brief CV of the entrepreneur or applicant.”
In its evaluation of business plans Ngundze says the bank typically looks at the following criteria:
- A comprehensive breakdown of what needs to be financed
- The entrepreneur’s own contribution
- Evidence that the applicant has conducted extensive homework on the business he wishes to start
- Who and where the target market (clients) is and have they been accurately identified?
- Who the competitors are and the applicant’s key differentiating factors
- Suppliers and/or alternate suppliers. Do they offer reasonable terms?
- Are there substitute products?
- A SWOT analysis
- What are the barriers to entry in the industry, if any? (regulation, high capital requirements, too specialised)
- Is the business subject to seasonal fluctuations?
- How is the business affected by the
- current or future state of the economy?
- Are the premises leased or owned and is there room for expansion?
What process do you follow in evaluating plans in your organisation?
Applications are received from different sources and sales channels in the bank. These are then sent to a team of credit staff within Nedbank Small Business Services who assess the applications and plans according to the criteria outlined on page 64.
Reasons for Rejection
“The bank considers affordability,” says Ngundze. “It also places great emphasis on a comprehensive breakdown of the financial plan and the entrepreneur’s own contribution. Conflicting information between the business plan and supporting data will result in the entrepreneur being called into question. Finally, a poor credit rating does not bode well at all.
- To obtain more information, visit www.nedbank.co.za, click on Small Business Services and then on Management Guide.
- This will assist entrepreneurs with setting up and managing their business. It includes information on the requirements of a business plan.
4. Venture Capital | HBD Capital
VC companies typically favour early stage companies with high growth potential.
An equity investment which is subject to more than a normal degree of risk, venture capital is usually associated with a new business or venture and particularly with new technology projects.
According to venture capital expert Keet van Zyl of HBD Venture Capital, organisations such as his fund less than 1% of proposals received. HBD is a niche venture capital company and it has to be judicious with resources.
The screening process
- Only 25% of proposals received by HBD Venture Capital fit its funding mandate
- That number shrinks to 10% post the initial meeting with the entrepreneurs
- Half of those entrepreneurs, a mere 5%, pass the test and make it to the next round
- Only 1% will make it beyond the due diligence and legal negotiations to be successful in their acquisition of finance
How do venture capital companies typically define their investment mandates?
It is critical to learn as much as possible about the VC’s investment mandate and to ensure that the concept and business plan fit within its scope. Here is a list of common criteria for VC investment mandates:
- Most VC companies shy away from start-ups in favour of companies that are able to demonstrate revenue for anything from six months to two years
- Qualities and proven ability of the management team
- Equity-based funding is a likely requirement
- VC companies typically favour specific bands of financing requirements –
- R10 million to R50 million, or R100 million
- Sufficient barriers to entry, cutting down many competitors and ensuring a largely uncontested market space
- Potential for fast-paced, high growth
- Many VC companies will favour certain industries and exclude others
What are the key factors venture capital organisations typically find in a successful proposal?
- Match with the VC company’s investment mandate
- Viable current business model
- Aggressive growth strategy
- International expansion opportunities
- Growth in their industry
- Passionate entrepreneurs/strong management teams
- Can this entrepreneur be an industry leader?
- Can the business model create a “network effect”?
- Unique differentiating products/concepts
- Barriers to entry
What are some of the red flags that cause a plan to be rejected?
- Most venture capital companies make financing decisions that are based on the investment mandate – a mismatch with the mandate will result in rejection
- Slow revenue and profitability growth projections
- Lack of uniqueness
- Lack of scalability
- Lack of understanding of the industry in which the entrepreneur operates
- Inadequate strategic plan to be able to implement and grow a great business concept
- Unreasonable expectations of the valuation of the business concept
- False claims being made or misrepresentations
- Misalignment between the business plan and the entrepreneur’s oral ‘pitch’
What is the typical process for evaluating proposals for VC?
Not unlike other venture capital investors, the HBD process is designed to provide crucial decision points at each step of the investigation to ensure that the business owner experiences no unwarranted delays. Van Zyl outlines the procedure for evaluating business proposals received by the organisation:
- Initial Screening: The information provided in your business plan is evaluated to determine if it is in line with the funding mandate and whether it is likely to yield venture capital expected returns.
- Assessment: In this initial meeting the business owners will present their business case with the objective of determining possible synergies and the way forward.
- Term Sheet: A short investigation is conducted and a report is presented to the investment committee. If the decision is to proceed with due diligence, HBD will negotiate a term sheet and exclusivity agreement with the business owners.
- Due Diligence: Due diligence is carried out by a core team and outside expert consultants. A typical due diligence process can take between one and three months as it requires a very detailed review of the financial, human capital, legal, market and product components of the business.
- Deal Execution: If the investment committee approves the transaction, the legal documents are negotiated and implemented and the funding is disbursed.
- Call +27 21 970 1056
- Visit www.hbd.com
Attracting Angel Investors
Look to your networks and the people you know to find angels
Professionals. These include doctors, dentists, lawyers, accountants and so on. You know these people, so an appointment should be easy to arrange. Professionals usually have discretionary income available to invest in outside projects.
Business associates. These are people you come in contact with during the normal course of your business day. They can be divided into four subgroups:
Suppliers. The owners of companies who supply your inventory and other needs have a vital interest in your company’s success and make excellent angels. A supplier’s investment may not come in the form of cash but in the form of better payment terms or cheaper prices.Customers. These are especially good contacts if they use your product or service to make or sell their own goods.
5. Private Equity | Business Partners
A private equity investor will become a partner or direct owner of your business
Private equity capital is provided to companies for the development of new products or technologies, strengthening of the capital base or for acquisitions
Entrepreneur quizzed Business Partners’ Nic van der Westhuizen, area manager of the North Rand, on his views on the make or break factors when it comes to using your business plan as a tool to get funding.
What is the average ratio of plan submitted vs plan approved?
It varies between 17% and 20%. It depends on the number of business plans for start-up businesses; the approval rate here is normally smaller.
What are the characteristics of a successful plan?
It’s well thought through and realistic. This does not have to be an academically correct document. The facts in the business plan should be well checked. Assumptions should be well motivated. The entrepreneurs should preferably have some experience in the industry, or at least have the ability to be trained. The business plan is really a reflection of the abilities of the entrepreneur. They should also preferably have some own contribution towards the business.
What are the key factors Business Partners looks for?
How realistic is the business plan? We look at the risk involved in the business. This is determined by the viability of the business, the gearing, and the entrepreneur. We require a detailed description of the existing and/or proposed market and how the entrepreneur proposes to enter the market.
What can cause a business plan to be rejected?
Some of the major reasons for rejection are affordability (due to the high finance amount required the business cannot afford the repayment), viability of the business (especially in cases of new businesses), a poor credit history, lack of experience where it is required in specialised industries, and over optimism regarding projections without acceptable motivations.
What process do you follow to evaluate business plans?
All business plans are evaluated by portfolio managers and area managers. These are all highly experienced people. We do a desktop analysis, discuss the business plan with the applicant and visit his business, if applicable, before we make a decision. If we come to the conclusion that there might be a deal in it we do a detailed due diligence on all the relative facts in the business plan.
What is your best advice for writing a business plan to get funding?
Always write a business plan for yourself and not for your bank or financier. Regard a business plan as a roadmap for your business. Be honest and realistic in the document. Never fool yourself. Write the business plan yourself. The business plan that we want from the entrepreneur must be a realistic, workable document. It must be a “living” document that is updated on a continuous basis.
- Call +27 11 713 6600
- Visit www.businesspartners.co.za
3 Components Of The Perfect Elevator Pitch
Can you clearly demonstrate value when faced with a time crunch?
After filming two seasons of Entrepreneur Elevator Pitch, I’ve come to realise that there are three key elements to delivering the perfect pitch.
Our show is unique when it comes to pitching: Potential entrepreneurs have just one minute to pitch their idea, service or product. Those 60 seconds have added pressure because the contestants are being filmed, and they are talking to a camera (instead of people) while riding up to the penthouse suite in an elevator.
In real life, with a different set of distractions, it’s essential to know how to deliver a convincing elevator pitch. Whether you are pitching a product, a service or yourself, here are the three essential components in a pitch:
- Stimulate interest
- Transition that interest
- Share a vision.
Can you stimulate interest?
The first step, stimulating interest, is the most important. In fact, an “elevator pitch” is usually determined by the limited amount of time you have, and circumstances may only give you the opportunity to stimulate interest. If you do a good job of stimulating interest, this can yield a second opportunity, where you transition that interest and share a vision with those you are pitching to.
Keep in mind that people generally buy based on emotion, using logical reasons as their impetus for action. So, make a point to connect with them emotionally in order to stimulate their interest. Don’t be afraid to show your feelings; demonstrate high energy and excitement for your idea, business or service. Your passion and belief need to come through in your pitch!
Use the 100/20 Rule to your advantage: Have the energy that you are providing R100 worth of value and only asking for R20 in return. This attitude will generate enough attention, giving you the opportunity to transition the interest that you’ve garnered.
Make the transition
But people don’t buy exclusively on emotion. There needs to be some logic in the decision to make a purchase. Therefore, you must address some sort of pain, fear or guilt in your pitch, that those without your product or service may experience. And if you can illustrate how you (efficiently) solve a big problem, you’ll have more statistical success in your elevator pitch.
Making a genuine connection can help you transition interest. Learn to make yourself equal, then make yourself different.
Simply having connections to the same people or a point of similarity in your backgrounds will help bridge the gap with those you are pitching. Then you can emotionally connect, following that up with the logic portion of your pitch.
Transition the interest you’ve generated with a clear explanation of what differentiates you. Build credibility by discussing your sales, distribution, revenue, awards and/or successes. All of these different ways to “attract” allow you to segue from emotion to the logical reasons to buy.
Of course, it is of the utmost importance to be honest when you are pitching. The truth always comes out, so ensure that you aren’t over-promising with your pitch. Don’t create a void that you are unable to fill.
What’s your vision?
Finally, in order to excel when sharing a vision, you need to have a value proposition that backs the 100/20 Rule. Make the value that you bring to the table as clear as possible. The value you’re asking for in return also needs to be clear. If you don’t display confidence in what you’re asking for, you won’t instill confidence in those you ask.
Tell others exactly what you want, why you want it and what you’re willing to give in return. You should have already proved your valuation when transitioning interest, then reiterated that valuation as you progressed in the pitch.
Take the people you are pitching through the reasons why you can be of value to them, the impact that you can have on their life or organisation and the capabilities you (or your product/service) possess that makes working together beneficial for all involved.
Practice your pitch, then get rich
After following each of these three steps, close with one simple question to gauge whether you are aligned or not: “Can you see any reason you wouldn’t want to move forward?”
If you utilise your pitch to stimulate interest in your product/service/self, transition that interest, then share a vision with those you are pitching to, the answer is almost always a resounding “no.”
And if you get objections or rejections, so what? Address whatever objections there are and if you still can’t get aligned, that’s OK. Take the perspective that the universe has a set number of rejections you need to get to before you find the right partner.
Related: How To Pitch
Be grateful for an opportunity to prove others wrong, and believe that if you keep working on your pitch, product, service or self, everything will come to you in the right way at the perfect time.
This article was originally posted here on Entrepreneur.com.
Alan Knott-Craig Answers Your Questions On Finding a Funder To Managing Your Staff
What you really need to know to land an investor.
Focus on one customer at a time. Make that customer happy. Move to next customer. Aim for ‘1 000 true fans’, then keep them happy.
The rest will come.
1. How do I find an investor?
You have 4 options:
Applicable if you only have an idea, and you need cash to make your idea a reality. Usually between R500 000 and R1 million. You need to milk your network: Parents, friends of parents, colleagues, parents’ friends, friends. If you have no network, you need to build a network or use your savings. There is no math to these investments. You get money because they believe in you, not because they seriously expect a return.
2. Early-stage VC
Applicable if you already have a working product with traction, ie: users and/growth, and you need cash to build out. Usually between R1 million and R2,5 million. There are a number of early-stage VC’s in South Africa, just ask around. Knife Capital are amongst the best. Ideally you want an introduction from a trusted party. Failing that, just email them directly. Give a simple pitch. They’re looking for 15X return on investment.
3. Late-stage VC
Applicable if you have a critical mass of users and meaningful revenue, ie: R10 million a year, and you need cash to grow. The late-stage VC’s are the likes of 4Di, hard to get access without an introduction from a trusted third party, usually one of your existing investors. They are looking for a 5X return on investment.
4. Private equity
Applicable if you have a cash-generative business that requires capital to either exit a shareholder, or to grow profits exponentially. Looking for 25% IRR.
There are also state-sponsored sources of capital for entrepreneurs from previously disadvantaged backgrounds, for example the Technology Innovation Agency. This is ‘soft’ money, requiring no equity or personal surety. If you can get it, take it.
Investors are looking for return on capital. If I invest R100 in an early stage company, I want to get R1 500 (15x) back within a reasonable period of time, ie. no longer than five years.
The key metric is Total Addressable Market (TAM). The size of the market you’re targeting determines the potential size of your business.
Assume you target a market with a TAM of R100 million (profit), and you assume you can get 10% of that market by 2020. That means your business will have R10 million of profits in 2020.
A private company is valued at a maximum of 7x profit, so your company will be worth R70 million in 2020. If you ask me to invest R1 million today, I need 21% of your company in order to realise a 15x return (R15 million) by 2020.
Start with TAM, work from there. Remember, every assumption you make will be questioned. Minimise your assumptions. Maximise the evidence for your assumptions.
2. If you are a start-up, what’s the most important thing you can do to grow?
Focus on one customer at a time. Make that customer happy. Move to next customer. Aim for ‘1 000 true fans’, then keep them happy.
The rest will come.
For consumer products, always make it easy for your customers to share. Friction-free sharing is the easiest marketing tool you can have.
Feature-creep is a big risk and can be a big distraction. You need one single value proposition that is enough to get customers. Having fifteen cool features will never compensate for the lack of one killer use case.
3. Our staff is growing, more than 20 now. Any tips on management?
Having four or five staff is not hard. You don’t need to be a good manager or leader. You can muddle along. It’s when your team starts growing past the twenty number that management becomes a skill rather than a word.
There are hundreds are articles written on the art of management, but Jack Welch (former GE CEO) broke it down to this:
- People want to know who they report to.
- People want to know how they’re being measured.
- People what want to know how they’re doing.
- That’s it.
- One boss. Clear KPIs. Regular feedback sessions.
Alan Knott-Craig’s latest book, 13 Rules for being an Entrepreneur is now available.
What it’s about
It’s easy to be an entrepreneur. It’s also easy to fail. What’s hard is being a successful entrepreneur.
For an entrepreneur, there is only one important metric of success: Money. But life is not only about making money. It’s about being happy.
This book is a collection of tips and wisdom that will help you make money without forgoing happiness.
Get it now
Do you have a burning start-up question?
XPRS Capital Africa Bridges Funding Gap Faced By South African SMEs
XPRS Capital Africa answers local SMEs call for funding.
Small and medium enterprises (SMEs) are a vital component of the South African economy. However, there is a substantial portion of the country’s estimated 650,000 SMEs that have no access to funding to assist in their continued growth
In response to an increase in demand for reliable and easily accessible capital for businesses like these, XPRS Capital Africa opened its doors in South Africa. The specialist business funding provider is geared towards rapidly vetting and approving short-term business funding ranging from R50,000 to R500,000. In addition, XPRS Capital Africa specialises in extending funding to SMEs that may not qualify for funding from traditional lenders.
Simon Leps, CEO of XPRS Capital Africa explains that XPRS Capital has its roots in the US, having been founded in 2013. “The company is a renowned and established alternative online business-to-business lender. Together with a team of data scientists and using thousands of data points, XPRS Capital has developed a proprietary credit vetting algorithm and packaged product set.”
“The technology and approval processes developed by XPRS Capital has a massively successful track record overseas and the experience that our company has gained over the years will help many more SMEs in South Africa to reach their potential,” says Leps.
“The XPRS Capital platform has processed over $1b worth of loans and has a proven track record of funding thousands of businesses across hundreds of industries,” he continues.
Leps adds that the company’s sophisticated algorithm allows XPRS Capital Africa to provide funding to many South African SMEs that are usually denied loans on the basis that their owners have less than ideal credit records. “Traditional lenders are often reluctant to lend capital to SME owners whose credit histories place them in higher risk categories. This has created a massive challenge for many promising SMEs. At XPRS Capital Africa, we focus on the health of the SME, and use state-of-the-art technology to provide businesses the cash flow they need to grow and flourish.”
Using the unique algorithm that we have optimised for the South African market, we are able to accurately assess any SME that has been in business for over a year, to rapidly provide a 3 to 12-month funding solution, notes Leps. “The online application takes less than 10 minutes, allowing SME owners to spend less time filling in forms for funding, and more time on their business.”
XPRS Capital Africa provides funding directly, working closely with SMEs to offer the fastest approvals, best possible repayment terms and most accurate risk profiles for any business.
“Cash flow is the lifeblood of every single business. Our mission is to provide this quickly, affordably and reliably,” Leps adds.
He notes that, given the high number of businesses that have trouble accessing financing, SME owners should also know how to maintain their own positive credit records. Thereby they can ensure that their businesses have access to as many options as possible.
“Ensure that all areas of your company are looked after to the same degree as most funding providers want to see that all aspects of a business are well managed. Up to date, audited financial statements and management accounts, well managed bank accounts, and good budgeting and forecasting show that the owners are attentive. Owners also need to know their businesses inside and out and be able to answer questions about their cash flow and deal pipeline.”
Related: The Investor Sourcing Guide
In addition to this, Leps says that the customer’s experience when dealing with the business could also have a measurable impact. “Any touchpoints that are available to your customers will be looked at by potential funders, so all customer facing assets should look professional and be kept up to date. This goes for websites, online portals and social media accounts.”
“The ability to access additional funds when your company needs it is the key to long-term survival. That’s why it is paramount to maintain the best possible credit record. However, it is also important to remember that, whatever the financial state of your business, business owners are never completely out of options,” Leps concludes.
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