sme growth champions presentation 2015 presented by: darlene menzies [email protected]
TRANSCRIPT
Why do small business struggle to access finance?
1. Lenders and Entrepreneurs views on the challenges
2. Help is urgently needed
3. Addressing common questions
4. Understanding the finance products – what are the offerings?
5. Choosing the right Finance Provider – who are they?
6. Getting finance ready – what do lenders need from you?
Darlene Menzies
15 years experience in corporate ICT sector 14 years small business experience Entrepreneur, Innovator, Small Business Specialist Twice liquidated – I understand entrepreneurs and the challenges they face Have gone on to build several successful technology companies Successfully raised > R15m from SA VC Funds for multiple pre-revenue start-ups
SMMEs are a priority lending sector for finance providers
There is plenty of money in South Africa to lend to small businesses
As lenders money is not the challenge, finding the finance ready businesses to lend to is the challenge
The majority of small businesses seeking finance are not finance ready
On average 80% of loan applications received are 40% ready / bankable
Entrepreneurs tend to think finance providers will lend based on their exciting business story or their passion rather than the businesses bankability
Finance Providers View
Most entrepreneurs don’t understand their business finances and many haven’t tested / proven their business models (i.e. how they will make money)
Business owners can’t answer questions about their own business plans, cash flow projections and financial statements
By far the greatest hindrance to the granting loans to small businesses is their failure to provide Financial Statements and current Management Accounts
The lack of finance readiness is an epidemic; it needs to be urgently addressed – practical advice and simple finance tools are sorely needed
The bottom line is, lenders want to lend, they need to lend! They are waiting for a pipeline of finance ready bankable businesses to lend to.
Finance Providers View
Entrepreneurs View
They need to access to finance to establish and grow successful businesses
They often hearing that SMMEs are key to economic growth & addressing unemployment - yet it almost impossible for entrepreneurs to access finance
If government, banks, other financiers and big business have money to lend - why aren’t they lending it?
Why don’t they make it easier to access - the lending criteria is very stringent
“We have many questions, where can we go to get answers?”– What if we have bad credit records or we have no collateral? – Who are all the lenders? Can’t someone provide a list– What are all the loan offerings, what are the differences? – A list of all the things a lender requires from us would help us
Practical assistance is needed– Help to complete applications (a lot of financial jargon)– Help to generate financial statements
There should be one place that we can go to get answers to the questions we all have and to get the vital assistance we need to ready ourselves for finance
Entrepreneurs View
Help is on the wayFinfind is an online platform (web and mobile based) that brings together the providers and seekers of small business finance with a focus on readying small business for access to finance.
1. Finance Literacy– Easy to understand information specifically written for small businesses; addresses common
questions, explains finance jargon, equips entrepreneurs– Explains the different types of lending products– Helps you understand the different kinds of lenders– Gives a summary of all Government Grants
2. Finance Readiness Test– Set of questions to measure finance readiness– Businesses who are not ready are assisted with their challenge areas– Business that are ready are linked with matching lenders
3. Finance Readiness Tools– Short Online Training Videos (to help you manage your admin and recordkeeping)– Simple Accounting System (to do invoicing, manage cash flow and generate financials)
4. Links to Business Advisors and Accountants
Help is on the wayFinfind is an online platform (web and mobile based) that brings together the providers and seekers of small business finance with a focus on readying small business for access to finance. It provides:
1. Finance Literacy– Easy to understand information specifically written for small businesses; addresses common
questions, explains finance jargon, equips entrepreneurs– Explains the different types of lending products– Helps you understand the different kinds of lenders– Gives a summary of all Government Grants
2. Finance Readiness Test– Set of questions to measure finance readiness– Businesses who are not ready are assisted with their challenge areas– Business that are ready are linked with matching lenders
3. Finance Readiness Tools– Short Online Training Videos (to help you manage your admin and recordkeeping)– Simple Accounting System (to do invoicing, manage cash flow and generate financials)
4. Links to Business Advisors and Accountants
Helps you understand the different finance products
Debtor financeOverdraftTerm
loanEquity
finance & VC
Trade finance & import / export
Asset finance
Contractfinance &
POF
Supplier credit
Grantfinance
Propertyfinance
Client deposits
Personal credit
Help is on the wayFinfind is an online platform (web and mobile based) that brings together the providers and seekers of small business finance with a focus on readying small business for access to finance. It provides:
1. Finance Literacy– Easy to understand information specifically written for small businesses; addresses common
questions, explains finance jargon, equips entrepreneurs– Explains the different types of lending products– Helps you understand the different kinds of lenders– Gives a summary of all Government Grants
2. Finance Readiness Test– Set of questions to measure finance readiness– Businesses who are not ready are assisted with their challenge areas– Business that are ready are linked with matching lenders
3. Finance Readiness Tools– Short Online Training Videos (to help you manage your admin and recordkeeping)– Simple Accounting System (to do invoicing, manage cash flow and generate financials)
4. Links to Business Advisors and Accountants
Helps you to choose the right finance provider
Family & friends Suppliers Banks Debtor financiers
Niche SMEfinanciers
Government agencies
Angels & VC funds
Trade financiers& import / export
Personal Product financiers
Client deposits & SA law
Small business are viewed as high risk – banks look at the viability of the business, collateral, affordability of repayments and your credit record.
First understand how banks allocate loans to help you set your expectations:– Banking world is largely depersonalised; decisions are not made by a
person who knows you/your business– A credit committee decides whether to approve a loan or not – Credit committees are only interested in the business case –
i.e. the cold, hard facts and figures contained in the financial statements
– Carefully researched ratios determine if business plans are realistic or not; and if cash flow and profit forecasts match up etc.
The most common reason for small business loan applications being rejected by banks is that they are not finance ready.
Lending from Banks
What are the main things a bank looks:– Viability of the business– Collateral – Affordability of the repayments– Clean credit record for the business and the owners
Loans from banks only represent <4% of the money lent to small business
…but don’t be too hard on the banks, remember they are lending their clients money!
Ask yourself this question when wanting to lend money (not just from banks) – would you lend yourself the money?!
Let’s look at banks
www.admineasy.co.za
Online Training - 6 x 10 minute videos1. The Entrepreneurs Reality2. Setting up Your Recordkeeping System3. Managing Your Business Paperwork4. Understanding Your Financial Statements5. Managing Your Staff Records6. Small Business Basic Legal Requirements
www.admineasy.co.za – it’s free
Simple training videos to set up a basic recordkeeping system
www.SMEasy.co.za
Finance Dashboard
Get yourself ready – what do most lenders ask for? Short company profile or brief description of the business Financial statements of the previous 1 - 3 financial years Current Management Accounts Cash flow forecast that includes how you will use the finance you are applying for Bank statements for the last 6 - 12 months Company founding documents (and shareholders’ agreement where relevant) IDs and personal bank details for all directors or owners Personal assets and liabilities for all directors or owners Details of what collateral is available Details of any personal surety contracts the directors or owners have signed Loan specific documents – e.g. for asset finance they will need details of the asset
being purchased
To keep updated about the finfind launch go to
www.finfindeasy.co.za
Twitter and facebook
finfindeasy and SMEasy
finfind - watch this space!
