Applying for business funding as an SMME in South Africa can be a daunting process. Banks are increasingly cautious (some would say downright reluctant) when it comes to lending money, while other lenders are likely to demand security before advancing any funds.
This creates a dilemma for businesspeople – having built up a business into a going concern, the idea of handing over any degree of control to a lender can be a bitter pill to swallow. Could unsecured business loans in South Africa be the answer?
While start-ups – which typically lack assets and have yet to demonstrate any real turnover – have to try and convince lenders on the strength of their business plans alone, existing business do have a few aces up their sleeves, and playing them can open the door to alternative business funding and cash advances.
Existing businesses can offer their property or assets as security, or can sell an equity stake in their business. Many SMME business owners would see this as a retrograde step, however – after all, surely the point of going it alone is so that you can determine the direction your business takes, without needing permission to grow?
Growth is often the spur for seeking funding – many businesses which are perfectly viable (judging by their financial and trading records) reach a plateau – typically once one or two branches have been opened.
It’s only natural that entrepreneurs will want to continue to expand, but they often cannot go it alone, which brings them to the crunch point: to borrow, or not to borrow? Of course, there may be other reasons for needing additional working capital, such as improvements to premises, new equipment to increase capacity or offer new products and services, or purchasing additional stock in advance of a busier time of year.
Alternative business funding offers an attractive route for SMMEs to access working capital without any change to their ownership structure. This is where existing businesses have a distinctive advantage over start-ups: they can use their trading statements and financial records as evidence of their viability – and crucially, of their ability to continue to generate turnover.
EBC provides working capital advances against future turnover – unsecured business loans in South Africa without requiring business assets as surety. Instead, EBC makes cash advances to small and medium businesses based on their trading histories and an assessment of their future prospects.
Rather than scheduled repayments, the advance is repaid as a fixed percentage of each sale. This makes the alternative funding model particularly suited to businesses with frequent transactions and strong, demonstrable cash flow.
The ideal scenario would be multiple daily credit card or EFTPOS receipts. EBC has been able to assist a range of business that fit this model, including restaurants, retailers, health and beauty businesses, and doctors’ and dentists’ practices.
By repaying the cash advance through a percentage of each sale, the repayment term varies as trading conditions do. As sales increase, the working capital (plus interest) can be repaid more quickly.
EBC is unfortunately unable to assist start-ups or businesses that have been trading for less than six months, as the absence of comprehensive, longer-term turnover data makes risk assessment more difficult.
Additional criteria which must be met by vendors include a minimum monthly turnover of R150 000, and a minimum and maximum loan requirement of R50 000 and R2 000 000, respectively. EBC offers unsecured business loans in South Africa on the understanding that the full amount will be repaid within 11 months of the date of transfer of funds.
Working capital advances from EBC offer business owners the chance to take control of tomorrow without losing any control of their assets today.