At the onset of the pandemic, the government launched a number of relief funds with the intention to support SMEs with access to capital during the period when economic activity was negatively affected by Covid-19. But with more applications for relief than funding available, or slow approvals of applications, many businesses have been left in a precarious financial position.
“Most SMEs don’t have large reserves of funding to see them through extended periods of low turnover and cash flow. Without the necessary funds, many businesses have struggled to meet their payment obligations, including staff payroll, rent, essential support services, as well as inventory and supply chain payments,” states Trevor Gosling, Co-founder, and CEO of Lulalend – a financing partner to South Africa’s small- to medium-enterprises (SMEs).
Gosling explains that low or paused trading and limited access to funding over the lockdown period had a compounding effect on many businesses. In addition, many SMEs are now gearing up for the peak summer trading period. “Now more than ever, this is the time when a healthy cash flow is vital to be in a strong position to grow. Significantly reduced liquidity impacts SMEs’ ability to make the investments required to take advantage of opportunities and plan for growth.”
Government’s financial assistance to the SME sector will need to be supplemented with decisive action taken within the SME landscape, he adds.
“The R1.4bn relief package is not enough to save a sector that contributes an estimated R1.5 trillion to the economy. Yes, the financial aid is welcomed but it is crucial that SMEs take action to ensure that they are able to recover from the economic hardship that the last year has dealt them,” says Gosling.
It may seem counterintuitive, but Gosling explains that borrowing capital capital plays an important part in any business growth strategy. There is often a misconception that all debt is bad or that it is only used by struggling companies. “In fact, the opposite is often the case. Some of the world’s most successful companies, including the likes of Apple and Google, routinely seek capital infusions and take on debt to fund expansion and drive short term growth’’ he adds.
Lulalend is very aware that the lack of real-time access to funding is a critical issue that needs a solution. We were founded with the goal of making it easy and fast for SMEs to access the working capital they need to grow. Our unique online solution allows SMEs to secure short term funding of up to R2 million within 24 hours. We believe that enabling business owners to quickly access funds will not only help them achieve their goals but also help drive the overall economic growth of the nation.
Lulalend has provided access to critical funding to thousands of local businesses across the country, covering all sectors of the economy. They have been recognised by FNB as one of the most innovative financial companies in South Africa and partner with the likes of the NSBC (National Small Business Chamber).