Retail Capital CEO David Lewis. (Supplied)
Cape Town - While cash flow is a universal challenge, entrepreneurs, who are starting and running small businesses in South Africa, face extra financial strains, according to Retail Capital CEO David Lewis.
He believes the South African credit market is conservative and restrictive and that small business owners are better served by a credit environment that is responsive, simpler and more flexible.
South African businesses have a high failure rate compared to other countries, with five out of seven failing in their first year of trading, mostly due to cash flow problems.
"The banks’ rigid product offerings, inflexible approach and lack of personal service are common stumbling blocks that obstruct small business owners on the road to securing working capital," said Lewis.
"Complex, lengthy application processes and poor approval rates act as deterrents and business owners have welcomed an alternative source of funding that is able to provide the working capital they need when they need it."
Retail Capital, for instance, advances a lump sum of the business’s future sales so that it effectively funds its own growth.
An agreed proportion of future card transactions are paid over until the total value has been reached.
No guarantees
Small businesses such as restaurants, beauty salons and independent retail stores are considered to be high risk entities, which typically mean that banks are not willing to assist without guarantees.
The small business sector does play an important part in job creation within South Africa but yet faces numerous challenges that continually hinder its to fight unemployment rates.
According to Statistics South Africa June 2014, South Africa shed 75 000 jobs in the first quarter of the year alone with Some of largest declines in employment were observed in the wholesale and retail trade.
- Fin24
* Share your experience of setting up your business and get published or simply ask a question. Our business panel can put you on the right path.
He believes the South African credit market is conservative and restrictive and that small business owners are better served by a credit environment that is responsive, simpler and more flexible.
South African businesses have a high failure rate compared to other countries, with five out of seven failing in their first year of trading, mostly due to cash flow problems.
"The banks’ rigid product offerings, inflexible approach and lack of personal service are common stumbling blocks that obstruct small business owners on the road to securing working capital," said Lewis.
"Complex, lengthy application processes and poor approval rates act as deterrents and business owners have welcomed an alternative source of funding that is able to provide the working capital they need when they need it."
Retail Capital, for instance, advances a lump sum of the business’s future sales so that it effectively funds its own growth.
An agreed proportion of future card transactions are paid over until the total value has been reached.
No guarantees
Small businesses such as restaurants, beauty salons and independent retail stores are considered to be high risk entities, which typically mean that banks are not willing to assist without guarantees.
The small business sector does play an important part in job creation within South Africa but yet faces numerous challenges that continually hinder its to fight unemployment rates.
According to Statistics South Africa June 2014, South Africa shed 75 000 jobs in the first quarter of the year alone with Some of largest declines in employment were observed in the wholesale and retail trade.
- Fin24
* Share your experience of setting up your business and get published or simply ask a question. Our business panel can put you on the right path.
