JOHANNESBURG, (CAJ News) – THE South African small and medium enterprises (SME) sector is set for a major crisis unless access to adequate business funding can be ensured as a matter of urgency.
This is according to online lender, Lulalend, in its just-released Key Funding Challenges for South African SMEs 2017 report.
Lulalend Chief Executive Officer, Trevor Gosling, said traditional lenders had lost their appetite for short-term unsecured business lending, leaving many SMEs with limited options for accessing much-needed – often life-saving – funding.
Seventy six percent of respondents to our national survey of SMEs said they had undergone a tedious months-long paperwork-heavy process in applying for business funding from traditional lenders, only to have their applications denied.
Considering access to credit was the leading business challenge for nearly three out of every five SMEs surveyed, this disconnect between the needs of business owners and the lenders that have traditionally supported them is creating conditions of high risk and volatility.
Gosling said considering the volatile economic environment, it was particularly alarming that nearly a quarter of respondents listed
“unforeseen circumstance” as their primary reason for seeking funding.
“When businesses are already operating at minimal profitability or even at a slight loss, any unforeseen circumstances requiring an injection of cash could spell disaster for them unless there is quick access to much-needed short term funding,” he said.
Gosling bemoaned that traditional lenders were falling short in that aspect, choosing instead to limit their exposure to the riskier short-term unsecured lending our SME sector so desperately needed.
However, there is room for optimism.
According to the findings of Lulalend’s survey, 30 percent of SMEs believe they would achieve revenue growth of more than 50 percent over the next year.
However, lack of access to funding, driven primarily by cumbersome regulatory requirements, extensive paperwork, and exhaustive amounts of time required to apply for loans, and lenders’ hesitance to incur risky unsecured debt would limit the sector’s ability to drive much-needed economic growth and job creation.
– CAJ News