Financial viability a challenge for entrepreneurs
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Sefa provides direct loans from R50 000 to R5 million. Small and micro-enterprises (SMMEs) and co-operatives can access this through regional offices, Sefa co-location offices and satellite offices.
Regional manager Thula Mkhwanazi said on Monday that the year to end of March had been good in a number of ways.
“We have been able to achieve when it comes to initiatives of funding entrepreneurs with disabilities under the Amavulindlela Funding Scheme. We have also been able to finance a lot of black entrepreneurs. We are still chasing up on small targets that include funding women and youth-owned businesses, and we are almost there with them, too,” said Mkhwanazi.
“Our experience has been that at times entrepreneurs have been reluctant to pay, and we do have higher than ordinary impairments.
“In order to correct that, our strategy has been to focus on corporates and assisting them to achieve their enterprise development when they give specific work to certain groups and their only problem is finance - we as Sefa bridge that gap.”
Mkhwanazi said the challenge began when entrepreneurs needed to prove markets and the ability to generate revenue, which contributed to high impairments.
He said: “Where we can, we deal directly with corporates knowing that they have given suppliers the work, and will be able to generate revenue and repay us. We are also doing the same with government departments. We approach those that have specific projects earmarked for small and medium enterprises directly to say that if the challenge is funds, Sefa will bridge the gap. Where a person does not have a market, we cannot really assist them.”
Mkhwanazi said the provincial development finance institution was receiving a lot of applications, while the conversion rate was low. “The challenge is that people approach us while they are not fundable. This is because they cannot show the ability to repay the loan or cannot afford the loan.
“In other instances one finds that after doing the financial model, one realises that they have under-quoted or such. Their financial viability is a challenge. At times, they have bad credit ratings.
“While Sefa will not not fund applicants based on their credit rating, we expect them to have made arrangements with the creditor, then we would assist. If you come to Sefa owing other financial institutions, we cannot assist you.”
Mkhwanazi said in most cases entrepreneurs could not substantiate their ability to repay. He said that for this reason they approached departments and corporates to tell them that they did have funds, but lacked entrepreneurs who could show an ability to repay as they financed on risk without focusing on security.
Mkhwanazi said this approach had helped increase the deal flow (source) and the quality of the deals.
He said the KwaZulu-Natal SMME sector had great potential, although not everyone was an entrepreneur.
University of KwaZulu-Natal agricultural economist, Maxwell Mudhara, agreed that funding was not readily available to farming entrepreneurs.
“The process itself might be too onerous. People in rural areas generally struggle to enumerate, therefore presenting a comprehensive budget might be difficult. Some do not know about the funders. The challenge is awareness and numeracy,” said Mudhara.