Access to funding and lack of skills remain critical challenges facing SME’s

While there is general agreement that SMEs are a key driver of employment and job creation in South Africa, and play a vital role in achieving the National Development Plan’s Vision 2030, Kenneth Fisher CEO: Business Finance SME at the Real People Group says SMEs continue to face numerous challenges making it difficult for this sector to prosper.

“Access to credit remains a major obstacle for SMEs, particularly in the current economic climate where credit providers have tightened their belts when it comes to granting loans.” 

“Only 25% out of 84, 4% of loan applicants are successful and out of the 25% of successful applications, 85% of applicants that have accepted the loan, only 18% go on to actually get the loan (NCR, 2011),” says Fisher.

In addition to accessing finance, Fisher says adequate training and lack of skills is another area where SMEs fall short. 

“It is commonly known that eighty percent of SMEs fail within the first two years, which in many instances comes down to entrepreneurs lacking the skills, mindset and business acumen to successfully manage and run a business. 

“Lack of knowledge and experience sees owners not planning properly, not being able to successfully access markets or not meeting the requirements or standards of their particular industry,” he explains.

Another area where Fisher says small business owners often fall short is cash flow management. 

“Without proper cash flow and profits the business will not be sustainable. Here owners will need to structure their purchases, decide on which customers they are prepared to give credit to, how they pay suppliers, and for instance when to use a credit card to improve cash flow. Inadequate cash flow management very often sees small businesses having to close their doors,” he emphasises.

And because the local regulatory environment remains onerous for small businesses, Fisher says small business owners will need to be prepared to deal with lots of red tape.  

“Participants in the 2013 Small Business Project (SBP) SME Growth Index reported that they spend on average 75 hours a month dealing with red tape when really, the business owner should be spending time selling and growing their business.”

“Business registration through CIPRO can also take up to 21 days locally in comparison to the Far East where it only takes four to five days. While local reporting requirements for small businesses are also excessive and tax incentives small,” he adds. 

In the end when it comes to overcoming these challenges Fisher believes that it often comes down to having the right business partner. “All of these factors contribute towards creating a virtual cauldron of diverse but significant challenges for small businesses.”  

“It is therefore critical that entrepreneurs opt for a partner that offers a holistic and synergistic approach in terms of finance, after-care, mentoring and training. Our view is that funding without effectively providing ongoing skills and business support services, is not working towards achieving our overall group vision of ‘sustainably improving lives’,” he concludes.