The local lendscape is growing and South Africa is becoming a real player in the sector. This is a result of leveraging tech and data which is not only improving financial accessibility but is also building more solutions for SMEs across the sector at large. 

Addressing the need for small business funding

A long-standing challenge for many of the 2.5 million SMEs in South Africa, is access to funding. In fact, traditional funding is reported to be the most difficult source of funding to secure. The sector has been dominated by traditional banking institutions and the process has been full of friction: from long waiting periods to excessive paperwork and strict lending criteria. Fortunately, the industry is changing and working capital is now accessible from non-banks. 

How are alternative lenders interrupting the sector?

Forward-thinking Fintech providers are using data and technology to build detailed customer profiles so they can make better credit decisions and manage their risk better. This data also alleviates the need for high volumes of paperwork which is streamlining the process. Further to this, they offer swift timelines with some lenders like Merchant Capital, providing working capital in under 48 hours. Best of all, they offer repay-as-you-trade repayment terms so repayments work directly in line with turnover. Meaning that when business is slow, repayments are smaller, and when business is up, repayments increase. This makes it far more manageable for business owners so they can use funding strategically to grow their businesses rather than simply plug holes. 

How to secure alternative funding?

  1. Choose the right lending partner: Do your research and ensure that the lender has your best interests at heart. A reputable lender will never let you borrow more than you can repay. 

  2. Ensure you clearly understand the requirements of the alternative lender. Check out the different financing options available to you and make sure it is in line with your business, industry and cash flow needs.

  3. Gather the necessary documents. Have these available for your funders so you can respond quickly and get your approval timeously. 

  4. Document your company’s credit history so you have an accurate reflection of your viability. A lender will want to know that you are a sound investment and will lend wisely. 

  5. Keep records of customer credit and payments and ensure this is not putting your cash flow under unnecessary pressure. Documentation records will prove your customer’s creditworthiness and prove your previous track record. 

The bottom line

The South African lending sector has morphed dramatically in recent years. Gone are the days when SMEs had to scrounge around for working capital and wait for months on end for approvals. The alternative finance sector has totally disrupted this market with solutions tailor-made for the retail sector. For more information on how Merchant Capital can fund your SME’s ambitious growth, contact us today.

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