Bridging the expectations gap between SMEs and banks to facilitate finance

| 0 Comments

 

SME_BusinessCase.jpgFinding a solution to the perceived “shortage” of ready finance available to local start-ups, could involve assisting entrepreneurs to better understand the role of money in their businesses, and giving them the means to manage it appropriately. If SMEs have viable operating models in place prior to approaching finance institutions, and can clearly define the innovation and value of their idea, there is a far better likelihood of them securing finance says Shawn Theunissen, head of CSR at Growthpoint Properties and Property Point (Growthpoint Properties’ enterprise development programme), in this month’s SmartProcurement.


Having a reliable source of finance is a critical aspect of any business’ continuity, especially when one is operating a start-up. “Between investing in infrastructure and financing the day-to-day operations of one’s business, entrepreneurs often find their cash reserves and resources stretched to the limit repeatedly,” says Theunissen. “For many, the immediate solution is to try and secure finance through a bank or other financial institution. However, what most don’t realise is that funding might be declined owed to a mismatch between their and the potential financier’s objectives.”


Property Point’s experience as an enterprise incubator has shown that most SMEs do not have the requisite business models to support and make use of the very funding they are trying to access when they apply for it, explains Theunissen. “Instead of having an operational model in place that allows the business ‘to do business’, many SMEs try to access money to put this model in place.”


In cases like this, the entrepreneur will have effectively failed to prove the “business case” for financing: if the SME is not operational, it cannot make money. If it cannot make money, it cannot repay the financier’s loan. As such, entrepreneurs need to appreciate the difference between paying for the company’s operations (i.e. all the set-up costs) and paying for the company to operate (i.e. assisting it to do business and generate cash flow).


However, Theunissen maintains that having the right operational model in place goes beyond “doing business”. It also means that an entrepreneur must have the resources and skills available to make the best possible use of the loan.

 

ShawnTheunissen2.jpg“Again, based on our experience, we have seen cases where loans become burdens as opposed to enablers in certain small businesses. This is usually owed to a lack of financial experience and accountability, with entrepreneurs either being too scared to use the money, or using it very sparingly or inappropriately.” Without knowing how to use financial products, access to these can become a moot point in many instances, with poor cash flow being confused with a lack of funding and funding opportunities.


Theunissen says that this is why Property Point works with the businesses on its programme to develop appropriate operational models that will assist them to achieve growth, and get them to a point where they are operationally ready to make use of funding. “Entrepreneurs are also equipped with the tools they need to understand management accounts and the accounting process. In this way, they stand a far better chance of not only accessing the finance they require, but of using it to make a sustainable success of their business,” he concludes.


For more information visit propertypoint.org.za.

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

 

Career opportunites

Warehouse Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
R400 000 - R480 000 CTC per annum.Location: ...More

Supply Chain Analyst

  • <500 000 Analyst Permanent Supply Chain Western Cape
R400 000 - R500 000 per annum.Location: Cape ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Consultant
R650 000 - R750 000 per annumLocation: Cape ...More

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
Salary: R 800 000 - R 900 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Salary: R 600 000 - R 650 000 ...More

Supply Chain Analyst

  • <500 000 Analyst Gauteng Permanent Supply Chain
R600 000 - R700 000 per annum Location: ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
R850 000 - R1 000 000 per annumLocation: ...More

Commodity Manager

  • <500 000 Commodities Permanent Procurement Management Western Cape
R700 000 - R850 000 per annum,Location: Western ...More

National Supply Chain Manager

  • <500 000 Across borders Permanent Procurement Management Supply Chain
R750 000 - R1 000 000 per annum,Location: ...More

Industrial Engineer

  • <500 000 >500 000 Industrial Engineer Operations, Planning & Inventory Permanent Western Cape
R450 000- R500 000 CTC per annum,Location: Western ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
Category: Procurement,Salary: R700 000 - R800 000 per ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Procurement Management Supply Chain
Category: Consulting,Salary: R750 000 - R800 000 CTC ...More

Logistics Manager

  • <500 000 Across borders Logistics & Warehousing Permanent Procurement Management
Category: Logistics,Salary: R900 000 - R1 000 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Area of Specialisation: Planning,Salary: R500 000 - R650 ...More

Industrial Engineer

  • <500 000 Analyst Gauteng Industrial Engineer Permanent
R800 000 - R850 000 CTC per annum.Location: ...More

Security Manager

  • <500 000 Analyst Gauteng Permanent Procurement Officer / Specialist
(Total Cost to Company R350K - R550K).This is ...More

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
(Total Cost to Company R650k - R750k) excluding

Commodity Manager Raw Materials

  • <500 000 Commodities Gauteng Permanent Strategic Sourcing
(Total Cost to Company R980k - R800k) excluding ...More

Commodity Manager Logistics

  • <500 000 Commodities Gauteng Logistics & Warehousing Permanent
(Total Cost to Company R1mil - R900k).Industry: Engineering

Procurement Consultant

  • <500 000 Gauteng Permanent Procurement Consultant Procurement Management
(Total Cost To Company 550K - 450K) includes ...More