Short-term funding product caters for SMMEs

Accessing finance remains one of the biggest stumbling blocks facing South Africa’s small and medium enterprises (SME). More and more SMEs are turning to alternative sources of funding as finding capital is proving to be difficult using the traditional methods. “Traditional bank finance – limited in today’s restrictive credit markets – is tending more towards higher value, better-secured funding and away from lower-value, higher-volume and higherrisk lending. This not only restricts initial capital spend, but also working capital requirements for daily stock purchases or creditor repayments,” says Menso Kwint, accounts executive for Lombard Trade Finance, essentially a short-term funding product that may be used in conjunction or as a substitute for traditional working capital bank finance. “Especially during the critical start-up phase of a business it is proving very difficult to access capital as well as any expansionary plans thereafter. New ideas need capital to grow.” Recent currency fluctuations have also particularly affected import and export companies in South Africa. SMMEs have several benefits that they can use to their advantage including their ability to react quickly to uncertain times and demand by changing their modus operandi to adapt to a changing situation. “Often larger companies feel the burn of excessive overheads a lot quicker when their top line revenues drop. Smaller businesses may be able to cut back more easily, or not even have a lot of the comparable overhead structures in the first place. However, bigger companies also tend to have more financial reserve to dip into in the tough times which could keep them alive for longer.” “Mature producers in America and Europe are looking for new frontiers to do business. The BRIC member countries have now aligned with South Africa. More and more the world’s eye will fall on Africa as a potential market. The view is also changing on Bottom of Pyramid economies – once thought to be of high risk and low return, they now offer growth in comparison to saturated markets,” he says. Kwint says it is important for SMMEs to use the opportunity of providing a gateway into Africa to their advantage.