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How to Put your Small Business in the Best Position to Get Credit from a Bank

There are specific ways in which you can reassure a bank that your business is capable of repaying any money they lend you, increasing your chances of acquiring credit

Standard Bank

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Small and medium enterprises (SMEs) account for almost half of South Africa’s gross domestic product (GDP), up to half the formal wage bill, and some 60% of private sector employment. So, most banks feel it is important to find ways to give SMEs access to finance to increase the positive effect they have on the national economy.

Related: How to Fund your Small Business

The trouble is, though, that banks are strictly regulated, because they are responsible for the billions of rands entrusted to them by individuals and businesses. In other words, like SMEs, banks play a vital role in the economy. They cannot put themselves at risk by lending money to small businesses that might fail.

As a result, they have standard processes and procedures for assessing the credit readiness of a business and how likely it is to repay what it borrows.

Get credit ready

“As the bank for entrepreneurs, we focus on making access to credit possible and, therefore, take different approaches to helping SMEs get to credit readiness,” says Ethel Nyembe, Head of Small Enterprise at Standard Bank.

“We believe that credit is only one element of an SME’s financial responsibilities. So, it should not become a burden to the business. For that reason, our Small Enterprise unit offers basic affordable banking services that enable small businesses to build financial records and capacity.

We then add to these services, tools, such as our small business portal, that enable SME owners and managers to build their financial management capabilities.

“We also provide our SME customers with credit solutions that range from simple overdrafts and asset (vehicle) financing, to working capital and property finance services. These are complemented by payment, investment, risk management and cash management solutions designed to help them improve their credit worthiness.

“More than 90 of our relationship managers around the country are trained to provide these services. It’s worth taking the time to talk to them to understand what you need to do to help us help you.”

Get the 5 C’s in place

Another way of doing this is to follow the bank framework of the ‘five Cs of getting ready for credit:

  1. The first C is for ‘character’ and relates to your personal records, behaviours and attitudes. You need to show a good record of repaying debt, a good record in the industry in which you operate (including qualifications, certification, industry networks, and customer base), how committed you are to your business in terms of the time and money you have invested, and how much business management capability you have.
  2. Then there’s ‘capacity’. This relates to your business’ ability to repay specific amounts at specific times. Can you afford the new debt? How strong is your cash flow? How reliable is your income and will there be money in the bank on the day you need to make repayments?
  3. Capital’ refers to how much your business is worth in rand terms, how much you and other investors have put into the business, and whether you have other means of settling your debt if the business cannot.
  4. Collateral’ is about the assets you agree to use to repay the bank if your business cannot.
  5. The last C, ‘conditions’, takes into account external factors that could affect your business. Environmental conditions refer to the general state of your industry and the area where you trade, consumer demand, the state of the national economy, your competition, and the banks’ risk appetite as a result of all these factors. ‘Conditions’ also includes the purpose for which you need finance. You need to show that the loan will be used to develop the business instead of getting it out of trouble.

“Any owner of an SME who comes to us with as many of the five Cs in place as possible already demonstrates that they are serious about their business and about interacting with the bank responsibly,” says Nyembe. “It’s a great way to start a business banking relationship with us.”

Standard Bank SA is the largest operating entity of Standard Bank Group, Africa’s largest bank by assets. Standard Bank SA provides the full spectrum of financial services, with more than 720 branches and over 7 100 ATMs. Independent surveys of customer satisfaction consistently place Standard Bank at or near the top of their rankings. The personal and business banking unit offers banking and other financial services to individuals and small-to-medium enterprises. For further information, go to community.standardbank.co.za

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The Alfa Romeo Stelvio – More Than An SUV

The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession.

Alfa Romeo

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The All-New Alfa Romeo Stelvio draws inspiration from the legendary mountain pass linking Italy to Switzerland, with 48 hairpins in quick succession. The Stelvio pass is widely seen as one of the most beautiful and engaging roads on the planet.

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Enhance Your Entrepreneurial Flair With An Online Postgraduate Diploma From The University Of Pretoria

The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

Dr Alex Antonites

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The Department of Business Management at the University of Pretoria, a leader in business management education, will be offering an Online Postgraduate Diploma in Entrepreneurship for the 2018 academic year with some seminars to enrich your action learning experience.

The programme content focuses on the start-up processes, creativity and opportunity recognition, business planning and marketing as well as financial management. Furthermore, the programme emphasises entrepreneurial growth and small business policy development with relevance to the enabling environment.

Who should enrol?

The programme is designed for pre-, nascent and start-up entrepreneurs who want to attain an advanced degree in entrepreneurship. It is also intended for individuals who work in an entrepreneurial environment and are involved with small business policy development. Although many students in the programme have academic credentials in entrepreneurship or business management, the programme is also appropriate if your education and/or experience may be in other disciplines (e.g. engineering or medicine).

Admission requirements

A relevant bachelor’s degree.

Related: This Enterprises UP Expert Explains Why Start-Ups Really Fail

Additional programme information

The duration of the course is one year. The language of tuition is English and the course will be presented in two blocks by means of the blended learning method (70% online and 30% contact sessions). Students need continuous access to the internet to complete the course.

Course Contents

Overview of modules for Block A

  • Ideation-to-market: Starting up
  • International Business Venturing
  • Venturing Strategy Building (Part 1)

Overview of modules for Block B

  • Entrepreneurial Marketing
  • Entrepreneurial Supply Chain Management
  • Entrepreneurial Finance
  • Venturing Strategy Building (Part 2)

Click here for more information.

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Win A Business Makeover With Retail Capital To The Value Of R250 000

Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000.

Retail Capital

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Retail Capital is giving SMEs an opportunity to win a makeover to build their brand with an investment of R250,000. During the summer campaign, SMEs are encouraged to share the vision of how they would like to see their business grow, and led by a team of experts, Retail Capital will work with the winning SME to help make their vision come true.

While South Africa’s economy is not faring well, Retail Capital CEO Karl Westvig remains optimistic about the country’s retail and hospitality sectors. “We are seeing some green shoots, with an increase in turnover in these sectors – starting from the end of September. Economic conditions remain very tough, but businesses seem to be trading well into October and we’re hoping this continues into the festive season trading.”

According to recent statistics from Statistics South Africa (Stats SA), South Africa’s retail sales rose by 5.5% year-on-year in August 2017, following a downwardly revised 1.6% gain in the previous month and above market expectations of 2.3%. It is the biggest gain in retail trade since August of 2012.

Related: How To Raise Working Capital Finance

“I do believe that these sectors will see an improvement during the summer season. But, key to this will be for small business owners to ensure that they have the right amount of stock, adequate cash flow, as well as other systems in place to meet the ever-changing needs of customers,” says Westvig.

For many small businesses, however, continually adapting to market changes requires cash injections that they don’t often have.

The prize includes the following:

  • Business plan/consulting
  • Marketing strategy
  • Design and branding
  • Website and social Media and,
  • R50k capital to gear your business.

Westvig explains that the summer campaign tagline ‘Your Vision. Our Belief’ really speaks to why Retail Capital first opened its doors. “Our goal is to see the potential of small businesses and to work with them in making these become a reality.”

He adds that the idea is not to simply help one business during the campaign either. Westvig points out that one of the biggest challenges that small businesses face in the sluggish economy is enough foot traffic through their doors. “Generally, the main hurdle in creating brand awareness and projecting credibility of their establishments boils down to establishing a strong online presence.”

“One of the first ways that South Africans identify a business or service provider that they want to work with is over social media – even in a country where the digital divide has traditionally separated the technological haves from the have-nots,” he says.

He explains that companies that don’t have a social media presence are running the risk of being overlooked entirely. “They may attract customers in their own community with signage or word of mouth, but to grow a business, they need to expand their reach – and that’s where social media comes in.”

But, the reality is that resource and time constraints mean that for many SMEs, social media is not prioritised. “Unfortunately for the average small business owner, they don’t have the time or expertise to get connected.”

Understanding the importance of having an online presence, Retail Capital has also committed to developing the digital presence of all campaign entrants. This would include setting up each entrant’s digital presence on platforms such as Google, Facebook, Twitter, Tripadvisor, Zomato and any others that may be relevant to their specific market or industry.

“As a partner to many SMEs in South Africa, we are continually looking at new and innovative ways to help provide them with the much-needed support in order for them to realise their visions. SMEs need to be supported with initiatives like targeted education and training, supportive legislation, and funding opportunities that collectively help them grow our national economy,” says Westvig.

Related: 6 Great Tips For A Successful Shark Tank Pitch

Who we are and what we do:

“More than R1.25 billion has been extended to a range of businesses including food trucks, hair salons, restaurants, spas and franchised retail stores. Many of these businesses have not been able to raise funding in any other way, other than to go to unscrupulous lenders,”says Karl Westvig, the CEO Retail Capital, a company that provides working capital with the help of innovative lending technology.

“We have also estimated that for every R160 000 we lend, we create a new job. This means that 625 jobs have been created purely by enabling small businesses to get the funding they need for working capital requirements or expansion opportunities.”

Retail Capital’s system, which enables it to advance funding to small businesses, based on real time information on credit card transactions, is providing a new funding alternative to entrepreneurs who have previously been turned away by banks. Because it is able to get actual sales information, it can approve funding immediately, and allow for flexible repayment options based on sales cycles of the particular businesses it is funding.

“This creates significant opportunity for small business owners to focus on their business and grow volumes or look for expansion opportunities rather than spend their time frantically trying to repay debt or keep the business alive after debt repayments have eaten away at any cash reserves they might have had.”

Retail Capital funding is repaid by it taking a percentage of a business’s recorded credit or debit card sales, with repayments fluctuating in line with their business cycle. This has the effect of ensuring that it isn’t overburdened with debt.

“In the past six years since starting the business, small businesses have had the benefit of R1 billion in funding they would have been unable to get through traditional channels,”says Westvig.

Against the backdrop of recessionary conditions in South Africa, Retail Capital’s client information reveals growth in informal sector turnover across a number of industries.

“We believe that growth in the informal sector is outstripping that of the formal sector,”says Westvig.

As a large proportion of the businesses it funds are women- and black-owned, there is evidence that entrepreneurs who have previously been excluded from access to finance are now enjoying success now that their access to finance problem has been solved.

Win A Business Makeover with Retail Capital

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