Niche business finance solutions continue to assist growing SMMEs on the road to becoming bankable
While growing start-ups often don’t meet the stringent lending criteria enforced by banks and many other credit providers, Andrew Maren, CEO of Ecsponent’s business finance company, says without access to some sort of finance solution, South Africa will never be able to grow its struggling SMME sector.
“While credit providers are tightening their credit policies in the current economic climate, there are numerous viable small companies that require short or medium term finance solutions until they are able to reach a stage where they can approach mainstream banking institutions to obtain a business loan.
“It is in this space that many niche business credit providers, including Ecsponent, are seeing the value in offering alternative business finance solutions, allowing small businesses to continue growing until they are ultimately bankable,” he comments.
When it comes to the criteria banks use when considering whether a business is bankable or not, Maren explains that the company’s history and track record – of which the company’s financials are an important part – are what will be taken into account. However he says these aspects are often lacking when it comes to start-ups or small businesses.
“A new business will more often than not be unable to access or provide sufficient collateral or verification to obtain the finance needed to grow. In addition SMMEs face the common challenge of the risk and consequences associated with late payments by corporate contractors, as well as the red tape encountered when working with corporates,” he says.
It is here that Maren says a growing number of niche business credit providers are targeting their offering around these specific short and medium term finance requirements.
“Ecsponent takes a view on the underlying transaction and makes this their primary risk assessment thereby making the applicant’s risk secondary. This is particularly beneficial for businesses looking to fund a contract where, should the contract contain reputable counterparties – suppliers, procurers etc. – the business will be able to access the necessary funding,” he adds.
“In addition to improving cash flow and providing a financial solution for growth, Maren says these niche business finance solutions offer numerous other benefits. “SMMEs stand to benefit from increased sales and profitability, a heightened reputation with clients through timely delivery, improved operating capacity, as well as the ability to meet seasonal requirements.
“However, for me perhaps the biggest advantage to accessing these finance solutions is that growing SMMEs will not miss out on any lucrative opportunities and instead will be given the helping hand required to assist them on the road to becoming bankable,” he concludes.
Author: Andrew Maren – CEO of Ecsponent’s business finance company