SME’s Accessing funding in a time of COVID-19

EasyBiz Technologies hosted a webinar that highlighted how businesses can best navigate and adapt to the “new norm” as a result of the Covid-19 pandemic. One of the speakers at the webinar was Daniel Golderg, CEO and founder of fintech company, Bridgement, who explored the various funding options available to South Africa’s SMEs during Covid-19.

Goldberg painted a bleak picture noting that with about 700 000 formal SMEs in South Africa, it is concerning that less than 1% have received funding, despite measures that have been put into place to assist them during the Covid-19 pandemic.

He further outlined the current market in South Africa and SMEs efforts to access various relief fund grants from banks, government and private institutions. “There was a massive spike in Google searches by SMEs looking for funding when the lockdown commenced at the end of March, almost five times the usual volume.

“Bridgement alone has received business funding applications worth more than R850 million since the beginning of lockdown. To put this into perspective, the Department of Small Business Development only allocated about R500 million worth of funding for the lockdown period,” he added.

Goldberg noted that research by Yoco, a fintech business in the payments space (mainly in the retail, restaurant, food and hospitality industries), indicated that SMEs have been generating about 64% of their average monthly revenue compared to the pre-lockdown period.

“Over the past few weeks this figure has fluctuated at between 60% and 80%, indicating an upward trend. While this is positive, many businesses cannot survive operating under these circumstances.”

Goldberg said various other sector-specific relief measures were introduced for the most Covid-19 beleaguered industries. “Our own research shows that businesses have struggled to obtain any form of relief. Of the SMEs we surveyed, only 47% of them applied for relief, which is significantly lower than the amount of businesses that need funding.

“Most of them assumed they wouldn’t qualify as the criteria were deemed too stringent or difficult to meet, leaving many businesses feeling disheartened. Of those that did apply, only 15% were successful, which is also highly concerning.”

He noted that one of the most critical ways to solve this problem is a huge stimulus package, which is what the government did when it introduced the R500 billion government-backed loan guarantee scheme.

“While this much-needed initiative has been welcomed, it has come with its own set of challenges. The scheme is not about giving out loans to people, but rather to encourage banks to give loans to SMEs, which it will guarantee up to R200 billion.”

The challenge is that banks have struggled to deploy the funding and two months into the launch of this programme and only 4 800 applications out of 30 000 have been approved with about R10 billion has been deployed to SMEs.

Goldberg said there are various complexities relating to the scheme. “One is that the focus is on major banks and fintech companies have been excluded from deploying funds. This is frustrating because organisations such as ours have been specifically built to provide funding to many businesses at high volumes and to assist the smallest of small businesses.

“Another issue is that the government has let the banks decide who they lend to, using their normal credit scorecards. This would then naturally exclude many SMEs from being able to access funds,” he added.

He points to the example of fintech start-up, Kabbage, in the US, which was one of the top three providers of government Covid-19 loans, distributing $7 billion to more than 200 000 SMEs.

In his capacity as chairperson of the South African SME Finance Association (SASFA), Goldberg has approached the National Treasury and Reserve Bank to see how SASFA members can work with them to deploy the funds. “Collectively, SASFA members have deployed R20 billion in funding to SMEs over the past five years and are well-positioned to assist during these challenging times.”

Within this difficult milieu, Goldberg said accountants have an important role to play in helping their clients access funding. “As financial and accounting processes become more automated, accountants have more capacity to fulfil an advisory function for their SME clients.”

Bridget du Toit, head of sales and services at EasyBiz Technologies, concurred: “Automation and the fourth industrial revolution have lessened repetitive and administrative tasks for accountants, freeing them up to play more valuable roles in assisting their clients.”

With the unrelenting move towards digital transformation, organisations need to have the right tools to ensure their future business success. Industry experts will explore these essential apps and tools in the next webinar to be hosted by EasyBiz Technologies on Friday, 21 August at 13:00.

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Where a party receives any personal information (“PI”) related to the other party, the party who receives the PI, will comply with and have adequate measures in place to ensure that its employees, agents, subsidiaries and representatives comply with the provisions and obligations contained in the Protection of Personal Information Act, No. 4 of 2013. Any PI pertaining to one party which is required by the other party, will only be used by that other party for the purposes of this contract and will not be further processed or disclosed without the written consent of the latter and the recipient of that PI will take all reasonable precautions to preserve the integrity and prevent any corruption or loss, damage or destruction of the PI. If and when the contract is terminated, each party will, save to the extent that it is required to do otherwise by any applicable law, erase or cause to be erased, all PI and all copies of any part of the PI relating to the other party”.