25.11.2009 15:23:43

Investors Network Team

“South African businesses currently unable to find the credit they are looking for must look for alternative avenues of business finance. “ That was the recent message at a small business finance indaba recently held to find solutions to the many entrepreneurs and business owners looking to start or grow their businesses in 2010.

Cape Town – November 2009

Credit remains tight for small businesses across the country, despite a public relations boost from many of South Africa’s leading banks declaring that they are open for business and keen to support small business owners in the country. Despite the numerous government incentives and initiatives supporting banks that are still risk averse after the recent international banking crisis, and even with new lending initiatives from intuitions like the IDC, business owners still face incredible difficultly qualifying for credit and obtaining the funding they need.

“What we are seeing here is a bunch of sound bites created by the commercial banks who are merely pretending to pay attention to Main Street’s needs to gain political capital,” said John Stewart who lead the recent conference in Cape Town. ”The billions in loans offered to alleviate the credit crunch is not going to help many small businesses that are still struggling with the down economy and do not have the financial strength to meet the stringent lending criteria of these banks.”

However, the good news according to Stewart is that there is already plenty of help available for small businesses that need funding. Alternative financing options, like asset-based lending, can help many businesses get the backing they need when the banks say “No.” While these loans may cost businesses more in interest in the short-term, they are helpful and necessary to get a business back on its feet. Stewart also recommends that businesses who need financial restructuring work seek out an expert who has experience in re-structuring and providing alternative debt for small businesses. This can provide capital for your business to help make it through the downturn into the recovery so you can once again qualify for commercial bank loans at lower rates.

“Help for small business lending is not on the way – it’s already been here, but you need to know where to look,” Stewart says. “If your business doesn’t fit the bank’s narrow (and narrowing) loan criteria, this is a time when you need to think outside the box to get help rehabilitating and re-structuring your finances. But you can’t wait for banks or the government to fix the economy – you need to be proactive in managing your business and seek out a specialized financial advisors or networks who can help you to find the solutions that you need.

Business financing solutions like angel finance, venture capital and grant funding from organisations such as SEDA and Business partners have become an increasingly popular solution to many small businesses over the past 9-12 months. Business owners are realising that despite the historical culture in South Africa for business owners to go the bank first, there are many other, often much more beneficial solutions to find the funding you need. Business angels often come with strong experience, extensive contacts and much needed access to cash flow. Because they are buying a stake in your business and in effect become a partner to you, the success of the venture is as important to them as it may be to you as the owner.

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