Funding and its challenges

Actual Situation 70 - 80 % of SMEs fail! Access to finance is critical factor for entrepreneurial success 40 % of entrepreneurs are not aware of govt. funding services Less than 10 % of applicants get funded 75 % of SMEs with positive cash flow get funded

70 - 80 % of SMEs fail!

Access to finance is critical factor for entrepreneurial success

40 % of entrepreneurs are not aware of govt. funding services

Less than 10 % of applicants get funded

75 % of SMEs with positive cash flow get funded

Funders risk averse Onerous requirements of funders Structure within banks & handling of SMEs Less flexibility & no tailor made packages Turnaround time too long Little passion about client Insufficient communication & cooperation Challenges Experienced by BDS Providers with Funders

Funders risk averse

Onerous requirements of funders

Structure within banks & handling of SMEs

Less flexibility & no tailor made packages

Turnaround time too long

Little passion about client

Insufficient communication & cooperation

Scarce knowledge about government agencies Impact of indemnity admin fee Focus on larger and existing business Challenges Experienced by BDS Providers with Funders

Scarce knowledge about government agencies

Impact of indemnity admin fee

Focus on larger and existing business

Not enough security available Khula only option Processes take too long Administrative costs Need of Tax clearance certificate (vicious cycle) Working capital vs. long term funding Limited overdraft facility Funders not prepared to visit clients premises Challenges Experienced by Clients

Not enough security available

Khula only option

Processes take too long

Administrative costs

Need of Tax clearance certificate (vicious cycle)

Working capital vs. long term funding

Limited overdraft facility

Funders not prepared to visit clients premises

Clients not aware of funding sources Clients expectations too high Lack of entrepreneurial skills Lack of commitment Short term view of business Bad or no credit history Don’t have own accounting package Lack of monthly management reports Challenges by BDS with Clients

Clients not aware of funding sources

Clients expectations too high

Lack of entrepreneurial skills

Lack of commitment

Short term view of business

Bad or no credit history

Don’t have own accounting package

Lack of monthly management reports

Annual Financial Statements – once a year Do not understand difference between profit and cash flow Do not understand break-even No marginal costing done Challenges by BDS with Clients

Annual Financial Statements – once a year

Do not understand difference between profit and cash flow

Do not understand break-even

No marginal costing done

Independent contracts between service providers and banks Importance of bank accredited service provider Structures to enhance cooperation between service providers and funders Funders should pay regular site visits (with service providers) Financial and management trainings for SMEs Solutions - Funding

Independent contracts between service providers and banks

Importance of bank accredited service provider

Structures to enhance cooperation between service providers and funders

Funders should pay regular site visits (with service providers)

Financial and management trainings for SMEs

Clients need to be better informed about funding implications (taking responsibility) Encourage SMEs to have an accounting package Funders should pay regular site visits (with service providers) Better linkage with service providers Solutions - Funding

Clients need to be better informed about funding implications (taking responsibility)

Encourage SMEs to have an accounting package

Funders should pay regular site visits (with service providers)

Better linkage with service providers

Establishment of a forum – BDSP Forum BDSP professional body to accredit service providers – quality, standards, voice of BDSP Establish relationships between FI and BDSP Closer working relationships between banks and BDSP Solutions – from BDS Finance Forum SBW 2008

Establishment of a forum – BDSP Forum

BDSP professional body to accredit service providers – quality, standards, voice of BDSP

Establish relationships between FI and BDSP

Closer working relationships between banks and BDSP

Role BDSP to play in funding cycle: Client compliance – business administration, financial, legal, taxation, secretarial etc. Requirements of the FI – ratios, security, sensitivity, risk assessments etc Unique requirements of FI. Solutions – from BDS Finance Forum 2008

Role BDSP to play in funding cycle:

Client compliance – business administration, financial, legal, taxation, secretarial etc.

Requirements of the FI – ratios, security, sensitivity, risk assessments etc

Unique requirements of FI.

Hlumisa – Small Business Solutions cc Solly Fazel-Ellahi Cell: 082 780 8994 Landline: 021 419 2477 Ascend Business Solutions Jayant Gajjar Cell: 082 859 1785 Landline: 021 674 7690