Connect with us

Entrepreneur Today

How Alternative Funders Enable Small Biz Success

Alternative lenders are starting to play an important role in small business survival. Marilynn Leonard, co-founder of FundingHub, says matching the business with the right lender will depend on their specific finance requirements.





Up to 75% of South African small businesses fail within the first year. One of the biggest causes being a lack of funding, or poor financial management. Yet, many small businesses struggle to secure funding, either because they haven’t been in business long enough, or because they don’t understand the intricacies of the lending market.

Alternative lenders are starting to play an important role in small business survival. Marilynn Leonard, co-founder of FundingHub, says matching the business with the right lender will depend on their specific finance requirements.

Speaking in a recent episode of the Sage #SmallBizAfrica podcast, Leonard said some reasons SMEs fail to secure funding include:

  • Not having a compelling reason to borrow money;
  • Applying for a loan and the value is too high for the business to be able to repay; and
  • Not being in business for at least a year with revenue less than R1 million.

“Many small business owners don’t understand that they can only borrow a percentage of their turnover. No lender – whether a bank or an alternative lender – will advance a loan equal to their entire turnover.”

Alternative lenders are not registered with the National Credit Regulator (NCR) and cannot loan money to businesses that don’t meet the one year / R1 million minimum requirement. These businesses are considered start-ups and would have a better chance securing funding through an equity partner or personal finance, says Leonard.

Research has shown that around 40% of small businesses struggle to access funding because they don’t meet traditional lending criteria, which are not small business friendly.

Viresh Harduth, Vice President: New Customer Acquisition (Start-up and Small Business) at Sage Africa & Middle East says: “Small businesses have a better chance of accessing funding if they already have all their finances in order. Cloud-based accounting solutions can help them pull any finance report they need for their loan application.”

Related: How This Alternative Funding Solution Can Solve Your Business Growth Problems

Banks vs alternative lenders

Banks should be a small business’ first choice for funding, says Leonard, because they’re the cheapest. But they’re often slow to grant funding because of the checks and balances they must complete.

In cases where these businesses need money fast – for example, to pay invoices or salaries, or to fulfill a purchase order – alternative lenders are a good supplementary option.

However, the downside of accessing money within a day or two, she says, is the cost of alternative lending. This is why the benefits of accessing funding should outweigh the cost of acquiring it.

Tips for lending success

Before business owners apply for funding, they need to know why they need the capital. “Lenders won’t just hand over money,” says Leonard. “They’ll want to know the purpose of the loan, like expanding into new markets or paying salaries.”

Once they know why the business needs funding, they can decide what funding product is right for them.

“There’s been an uprising of alternative lenders in South Africa. It can be confusing, overwhelming, and time-consuming to find the right one,” she says. “That’s where credit marketplaces like FundingHub come in. We can guide you towards the right lender without you needing to know the intricacies of the available products.”

Credit marketplaces can also help small businesses avoid unsecured lending, or “loan sharks”, says Leonard. “Small businesses might get excited at the prospect of same-day loans, but they’re often ripped off by high interest rates and undisclosed costs.”

This happens because alternative lenders are not regulated by the National Credit Act (NCA). This makes it even more important to find a lender that realises the importance of self-regulation. She advises partnering with a lender registered with the South African SME Finance Association (SASFA), which encourages transparent and responsible lending. This is a relatively new association and is gaining momentum amongst the alternative business lenders.

Banks and responsible alternative lenders are also more understanding and accommodating with loan repayment terms, if the business runs into financial problems, she says. “Lenders are in business because you’re in business. They want to see you succeed. As soon as you have a problem repaying your loan, talk to them about renegotiating your repayment terms.”

Related: Marnus Broodryk Shares Alternative Funding Solutions And How You Can Finance Your Growth

Enabling success

Starting a business in South Africa is not easy, says Leonard. One of the biggest challenges facing small businesses is cash flow caused by slow or late payers. State-owned enterprises (SOEs) and large corporates tend to be the worst offenders.

“When a small business has to wait between 30 and 90 days for payment, they run into cash flow problems and also incur finance charges. At the end of the day, that big order they secured is not as profitable as it could have been. As a result, we’ve seen a surge in products like invoice and purchase order funding.

“Small businesses are starting to realise that alternative funding can be an enabler of their success. It might be expensive but it’s better than losing out on a big deal or not being able to fill a large order.”

Leonard says everyone has a role to play in enabling small business success. Government should enact policies that establish reasonable payment terms and create funding vehicles that help start-ups through the first tough year. They can then approach alternative lenders for the next round of funding.

The private sector should change their payment terms, especially as they diversify their supply chains to include more small businesses and meet B-BBEE requirements. “It has to be a collaborative effort. We have to work together to empower the SME space and micro enterprises if we want to grow the economy.”

“Small businesses should keep in mind that a loan is technically a business expense – and capital alone doesn’t guarantee their success. They should also focus on better managing their cash flow through regular forecasts and negotiating payment terms with clients, hiring and outsourcing to the best people, and having a business plan with clearly defined goals and steps to achieve them,” concludes, Harduth.

To listen to the Sage #SmallBizAfrica podcast featuring Marilynn Leonard, click here.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

Entrepreneur Today

What Franchises Need To Lookout For From Budget Speech

Franchise business owners are waiting with bated breath for the outcome of the 2019 National Budget Speech to be delivered by Minister of Finance, Tito Mboweni, as they seek more opportunities to increase their contribution to GDP.





Morne Cronje, FNB Head of Franchising, says the Budget Speech is an important economic indicator that franchises can use to gain insight on the government’s plans on spending and economic growth for the year ahead.

He highlights potential National Budget Speech outcomes that could boost confidence of franchises:


Any form of relief that is likely to bring positive change, rebuild confidence and address some of the key challenges impacting consumers will be welcome by franchises.

Cronje says consumer spending contributes a significant portion to the profit margins of franchises especially in the food sector.

Economic growth

Rating agencies are keeping a close watch on South Africa’s performance and prospects for growth, which will impact our Sovereign ratings for the rest of the year.

Measures that the government puts in place to promote economic growth this year will be of interest to franchises.


Franchise owners will be looking to benefit from regulatory changes that aim to improve growth, operating environment and enhance participation in all facets of the formal economy.


Based on the Mid-Term Budget Review in October 2018, there’s likely to be no major shake up from a business tax perspective. The anticipated relief in tax will go a long way to boost the profit margins of franchisees.

Infrastructure investment

Spending on infrastructure creates vast opportunities for franchise business owners, as well as job creation in the country. The government has signalled an intention to partner with the private sector to develop an infrastructure fund to increase investment in public infrastructure.

“Franchises that operate in South Africa should prioritise the National Budget Speech as key decisions announced by the minister have a direct impact on their growth,” concludes Cronje.

Continue Reading

Entrepreneur Today

5 Businesses You Should Start in 2019

Here’s the lowdown on consumer and technology opportunities in 2019 and beyond.





Savvy entrepreneurs should keep a close watch on consumer and technology trends in 2019. This, according to Silvertree Internet Holdings Co-founder and MD, Manuel Koser. Having invested in and grown a number of highly successful South African brands (among them,,,,,, and Silvertree’s management team sees several business opportunities set to grow exponentially over the coming decade.

Here’s the lowdown on consumer and technology opportunities in 2019 and beyond.

1. Indigenous and ethical: Personal and home care products

2019 Sees growing potential for personal care products – ‘Those with local and indigenous ingredients, ethical sourcing which is kind to nature and the body,’ Koser explains. ‘There is a lot of room to play in the African haircare market particularly, as it’s often overlooked by the major FMCG companies.’

The Silvertree MD also sees increasing room for innovative natural home cleaners as consumers become increasingly environmentally conscious. ‘Until now, it was all about the well-known cleaning products the major chemical manufacturers put on the shelves. Now, there’s increasing space for new, exciting entrants.’

2. New beverages

‘Locally-sourced ingredients and an earth-first mindset will also play an increasing role in the consumer beverage market. Add to this the fact that major soft drink manufacturers will struggle to produce drinks for increasingly health-conscious consumers. They’re often just not quick enough to adjust to changing consumer tastes – particularly the tastes of millennials. Think less about a standard fizzy drink, but rather one that’s kind to the body, with natural ingredients. Non-alcoholic: water plus, say, cucumber, or another indigenous ingredient. The market for this will grow.’

3. Ethical snacking

Plant-based, vegan, ancient grains, ethical, protein-rich snacks – these are just some of the trends Koser sees dominating in the snack segment in 2019 and beyond. It’s about unique, tasty, functional foods that cater to the modern, time-starved consumer, Koser explains.

4. Buy, sell and compare online

In the technology space, marketplaces, e-commerce sites and classifieds will all gain momentum in 2019 and beyond. This encompasses aggregators as well as more unusual online businesses, which are increasingly able to find and reach consumers interested in niche products and services.

‘Consider an online ice-cream business. Once, something like that would have been unthinkable,’ Koser explains. ‘But as consumers demand greater choice, room for niche products like this grows.’

Yet, dabble online and seamless execution and delivery become make-or-break factors. ‘Many South African consumers use services such as Google, Amazon, Uber and Spotify daily – world-class products that function on a global scale. You can call an Uber and wait for just two minutes before getting a ride,’ Koser explains. ‘It’s quick and totally seamless. Consumers have come to expect that level of service across the board. Aligned to this is the fact that the millennial wave is currently hitting Cape Town right now, and Joburg secondarily, meaning a number of opportunities are opening up. Go after products and services in the right space and consumers will follow.’

5. Reinvent the wheel – and make it better

The final type of business entrepreneurs should keep an eye on is those that currently have low Net Promoter Scores. ‘This means that very few people like them, or the services they provide are of very poor quality,’ Koser explains. ‘Think of postal service providers or telecoms companies. With any monopolistic or oligopolistic structures, the service is often terrible because the heavyweights hold so much power. There’s a huge gap here.’

An allied approach for entrepreneurs is to assess opportunities for automation, or cutting out the middleman with technology. ‘Once, many markets – such as real estate were opaque, meaning you needed a middleman to help you transact. However, as the capabilities of technology have grown, markets have become far more transparent – making it easier for buyers to match with sellers safely. Today, a lot of this is easy to automate services – think about connecting a homeowner to a prospective renter through a digital solution where renters can be qualified, for example, in terms of their finances, personal information and criminal records. Quick and simple. And no middleman.’

The biggest opportunities here centre around where consumers spend the greatest amounts of time and money, Koser notes. ‘Housing and rent are always major costs. In terms of where consumers spend their time, on the other hand, much of it is, on a mobile phone, or PC.’

However, entrepreneurial success is never down to any one magic formula, Koser emphasises. Nor does Silvertree invest in prospective entrepreneurs solely on the basis of the product or service they offer. ‘It’s about passion, perseverance and tenacity as much as it is about the quality of the product.’

Silvertree Internet Holdings is an investment growth partner who aims to understand, grow and scale business, consumer and digital brands to unlock the brands’ exponential growth.

Continue Reading

Entrepreneur Today

What To Watch For In Tito Mboweni’s First Budget Speech

By Rob Cooper, tax expert at Sage, and chairman of the Payroll Authors Group of South Africa.





Finance Minister, Tito Mboweni, delivers his first Budget Speech on 20 February at a difficult time for the South African economy. Even though President Cyril Ramaphosa has done much to restore business confidence in his first year in office, GDP growth remains weak, government finances are in relatively poor shape, and renewed load shedding is hurting business confidence.

Judging from his Medium-Term Budget Policy Statement in October last year, I expect Minister Mboweni — backed by the team in the National Treasury—to deliver a relatively cautious budget. Much of the focus will be on refinancing the state-owned enterprises and putting them back on to a sustainable footing.

We probably won’t see much in the way of radical thinking since the room for manoeuvre is so limited. Click each header below for an indepth video on the upcoming topics.

National Health Insurance (NHI)

Renewal of the country’s public healthcare system with a mandatory health insurance fund and free healthcare at the point of need has been the ANC government’s policy for years, but progress has been slow to date. There isn’t much money in the country’s coffers to fund something as ambitious as NHI, yet the government will want to show that it is advancing the concept ahead of the elections.

With an NHI bill to be tabled in Parliament soon, we could learn more about how NHI will be funded in this year’s Budget Speech — it’s still not clear whether we will pay for it through payroll taxes, VAT increases or other fundraising measures. As an initial step, we could see medical aid tax credits reduced (or at least not adjusted for inflation) to free up some funding for the NHI.

The Employment Tax Incentive (ETI)

The ETI Act came into effect on 1 January 2014; as a fan of this incentive, I was delighted that President Ramaphosa announced that it will be extended for 10 years another decade in his state of the nation address. However, I have also long argued that the scheme is not performing to its true potential because it is so complex for payroll managers to administer.

The introduction of the national minimum wage adds even more complexity— until and unless the ETI Act is amended, SARS is of the opinion that the National Minimum Wage will not qualify as a “wage regulating measure”. I hope the Budget Speech will announce steps to align the ETI with the national minimum wage and take other measures to simplify administration.

Tax hikes

I don’t expect any major increases to corporate or personal income tax this year since the taxpayer doesn’t have much more to give. I think the top 45% rate will remain unchanged, while tax bracket creep relief (to compensate for inflation) will be limited to lower income earners. It seems unlikely that the Minister will increase VAT again this year, given last year’s increase.

That means the Minister is likely to look at ‘moral’ taxes (sin and sugar taxes) to raise more money; we can expect another steep increase in the fuel levy. Perhaps we’ll also hear about efforts to improve SARS’ revenue collection after several years of under-performance. The agency seems ripe for a turnaround strategy, with high-powered team looking for a permanent chief to take the reins at SARS.

Follow us on @SageGroupZA on 20 February 2019 for LIVE expert insights from the annual Budget Speech.

For more information about Sage’s annual tax seminars, please visit:

Continue Reading



Recent Posts

Follow Us

We respect your privacy. 
* indicates required.