Making your bank manager happy
In the world of banking you are able to build up a good name, simply by keeping your credit record pristine. This good behaviour becomes an important asset for the business.
- Make sure your bank manager understands your business – not necessarily every detail, but basic principles – the cash-flow dynamics and any risks that the business has to face. Provide a copy of your latest business plan if you have made any new changes.
- Banks don’t like nasty surprises. If the business is experiencing difficulties it’s important that you inform your bank manager as soon as possible especially if your obligations to the bank will be compromised.
- Banks make use of credit ratings to evaluate your ability to repay them. Good credit ratings allow you to use your good name as a bargaining chip to negotiate the best possible deal if you need to borrow money from them.
- It’s important that you meet your bank manager in person, and meet regularly – especially if you wish to cultivate a long and beneficial relationship with your bank.
What is a loan review?
A loan review is “follow-up monitoring” of a loan or extension of credit by a bank.
When does a review take place?
There is often nothing to worry about when the bank contacts you for a “loan review”; in fact it’s a good thing. If you have conducted a loan account in accordance with the terms of the loan and made repayments on time, the bank might call a loan review to offer a client a better interest rate, better terms, or because a loan has reached a point where it requires re-negotiation. Banks make use of credit ratings to evaluate your ability to repay them. Good credit ratings allow you to use your good name as a bargaining chip to negotiate the best possible deal if you need to borrow money from them.
Can a deceased bank account attract charges and penalties?
According to Nedbank’s Deceased Accounts Division, the estate of a deceased person is charged fees and penalties, and will also earn interest if the account is in credit, until the bank has received notification of the death. The Executor of the Estate, or a person who has Power of Attorney, must supply written instructions to freeze the account.
Formal notification includes a written instruction informing the bank of the death and requesting that the account is frozen. The death certificate must also be supplied with the formal notification.
The Executor must also liaise with third parties who operate debit orders on the account and formally inform them of the death and provide the necessary proof. Otherwise debit orders and stop orders will continue to go through. If there isn’t enough funds to meet the debit orders, penalties will be imposed until the account is frozen.
The estate is liable to pay outstanding fees. If someone dies without leaving a valid will, the estate will devolve in terms of the rules of intestate succession, as stipulated in the provisions of the Intestate Succession Act, (Act 81 of 1987) and the descendant/s who inherit the intestate estate will be responsible for the bank charges which were acquired prior to the formal notification being supplied to the banknking charges.
Can a frozen bank account of a deceased estate still receive income? Some funds due are medical aid refunds and a balance of a pension from overseas If an estate is owed benefits from a pension fund or medical aid, these can definitely be paid into a frozen account”, says Werner Botha, Estate Administrator at FNB. An Executor looks after the administration of a deceased estate.
If there is a last will & testament, the executor will ensure that everything runs smoothly and in accordance with the law. The executor’s functions include:
- Taking control of the assets which form part of the estate
- Identifying the beneficiaries in the estate
- Carrying out the legislative requirements regarding the administration of the estate
- Paying the debts and the administration expenses
- Attending to the final income tax return
- Distributing the balance of the estate to the beneficiaries
- Beneficiaries received payouts directly
“However, where a beneficiary has been appointed on a life assurance policy such as a pension, the benefit under that policy will be paid directly to the beneficiary and will not form part of the estate”, explains Botha. “The benefit will, however, be added to the value of your estate for the calculation of estate duty. Policies that have no beneficiaries will be paid to the estate.”
How Spartan Has Geared Their Business To Help Fund Yours
Spartan doesn’t just fund entrepreneurial businesses, it is an entrepreneurial business. Kumaran Padayachee, CEO, Spartan reveals this is why his team understands SME financing needs and the unique challenges founder-led businesses face.
Historically speaking, entrepreneurs don’t typically have the quantity and quality of collateral needed to secure debt finance. It was this realisation that led Spartan to develop and deliver a solution that would help SMEs to grow their businesses, even though they didn’t always meet the criteria of more traditional lending institutions.
“We understand that many business owners don’t want to go the equity funding route, selling shares in their businesses in exchange for funding. Without the collateral needed to secure debt funding however, this is often the only route available to them,” says Spartan CEO, Kumaran Padayachee.
“We decided to approach things from a different angle. To service this sector, you need to be flexible. The same rules don’t apply as they do for corporates. To achieve this, we’ve assembled a team that really understands SMEs, their inner workings, the finance they need and the terms that will give them the best ROI for the funding they receive — after all, the point of funding is to help your business grow, so ultimately that’s what it needs to achieve.”
Spartan’s offers financing
At its core, Spartan finances small businesses (fast-growing companies with R5 million to R10 million annual turnovers) and medium businesses (R10 million to hundreds of million in annual turnover).
Related: Financing That Backs Entrepreneurs
Spartan finances specialised asset finance (tech, software, plant and machinery, office fit out and furniture); working capital finance (bridging finance, medium term loans); and growth finance (expansion, BEE deals, acquisitions).
Working capital in particular is a big portion of what Spartan assists its clients in. “This is project and growth-related finance, and many of the enquiries are for working capital, for which there is a huge need in the SME landscape.”
What finance suits your business?
As a debt funder, Spartan’s team carefully evaluates what the finance will be used for, and if the return is greater than the repayments — in other words, does finance make financial sense for the business?
“There are numerous ways that finance can be applied incorrectly by SMEs,” says Kumaran. “One of the first flags we look for is debtors age. If the industry norm is payment in 30 days, but a business is typically paid by its clients in 60 or 120 days, then we know there is something wrong with their internal processes.
Either the company is too shy to be assertive with clients, or it lacks the capacity or capability to invoice clients and collect cash. Either way, the result is a shortage of cash. Business owners in this situation apply for cash in order to be able to pay the bills, when they should be reviewing their business, pulling one or two levers, and improving their cash flows.”
Growing your business with alternative funding methods
On the other hand, there are many situations where working capital and bridging finance can help a business to grow beyond its own, organic abilities.
“A customer project or contract that requires a new product line or opening a new branch are both positive, expansionary situations. The problem is that there’s a lead time gap. You need to start the project, spend cash to hire people or purchase equipment, build internal capacity, deliver on the project and then the customer only pays you. Working capital and bridging finance allow the entrepreneur to do just that, and the company grows as a result.”
Bridging finance in particular is high risk and requires a large amount of flexibility, which is why more traditional funding institutions shy away from it. Spartan on the other hand offers revolving bridging loans to customers the team has worked with. “We understand this space, and our aim is to support the entrepreneurs within it,” Kumaran concludes.
Alternative finance solutions
Spartan is an Alternative Finance company that specialises in financing Small and Mid-sized businesses by providing: Growth Finance (structured finance for expansion); Specialised Asset Finance (equipment/machinery/technology/software/office fit-outs/energy/etc.) and Working Capital Finance (bridging finance & medium term loans).
Bridging Finance is available for one to three month terms and is ideal for contract or project-based businesses. It is a solution that assists businesses with solving cash flow issues due to growth-related challenges in their business and is either for a once-off need or for revolving business use.
Spartan is an Authorised Financial Services Provider 47631 and Registered Credit Provider NCRCP8669. e finance solutions.
What do I need to do in order to get a successful crowd funding campaign?
Advice on getting the gold you need for your crowd funding campaign.
I recently read through crowd funding and though this might be of benefit to me. What do I need to do in order to get a successful crowd funding campaign?
70 percent of most crowd funding campaigns never reach their funding laid out plan. If you only reach a portion of your desired pledge amount all donated funds are then returned to investors once your campaign date is up. Do your homework and make your campaign count.
To get the best out of your campaign, I would strongly advise you do the following:
- Lay out your plan way in advance
- Keep a proper and well-articulated business plan
- Create a compelling story.
- Use the social media and start a social media campaign
- Frequently promote your fundraiser, connect and interact
- Dish out rewards and incentives
- To go viral, go for educative, informative and entertaining videos
- Be more than unique and creative as more exposure will translate to more potential pledges
- Choose the right crowd funding site for you.
- Know and understand your end target audience
Where can I turn when banks are not helping?
Getting bank finance for my restaurant is almost impossible.
Getting bank finance for my restaurant is almost impossible. How else can I access the funding that I need?
Most small businesses will experience a cash flow challenge at some point during the next 12 months and raising capital from traditional banks is becoming a real challenge. Conservative lending policies and onerous application processes mean that finance applications can take up to twelve weeks or longer.
Banks require significant securities, which many business owners are unable to meet. In short, banks are making it very tough for small businesses.
The business cash advance
For businesses that accept credit or debit cards as a form of payment for their goods and services (termed merchants), the business cash advance is now available as alternative source of funding.
In simple terms, a business cash advance offers the merchant an upfront advance to buy a discounted amount of future business turnover. For example, you may be advanced R80,000 for R100,000 of future turnover, so the fees can be easily calculated as R20,000.
The payback is an agreed percentage of your turnover, paid daily until the full amount is paid across. Payback increases and drops with your business turnover and the smaller daily payments are often easier than monthly fixed instalments.
Quicker turn-around and more accessible
Comparing it to a bank loan, the business cash advance is more accessible, operates over a shorter term and requires no personal security. It is also much faster, typically available within two weeks.
The advance amount is based on historical credit and debit card sales and pay overs are daily. The costs are fully transparent and there are no penalties for late payments or extended payback. However, accessibility, flexibility and convenience come at higher cost than traditional bank lending products.
As with any financial product, it is important that the benefits gained from using the money are more than the costs, so it is important to have a good purpose for the funding and carefully consider the available options.
Over the last three years, the business cash advance has becoming more main-stream and this funding is used by business with a relatively high card turnover, such as restaurants, retailers, beauty salons, supermarkets, convenience stores etc.
What to use the advance for
The advance is typically used for a business opportunity, such as expansion, new stock, new equipment, marketing etc. Alternatively, it also offers through a difficult trading period or to cover an unexpected expense such as equipment failure when the money is needed quickly.
Small businesses are a vital part of the South African economy, contributing over 65% of South Africa’s employment and over 50% of GDP – accessing funding is imperative for these businesses to survive and grow.
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