1. Applying for credit facilities
Apply for credit facilities (such as a bank overdraft or revolving credit facility) when business is going well, which is when a bank is more likely to approve it. This also means you will have the money immediately available if you hit a cash flow challenges. Don’t wait until the business has hit a cash cliff to apply, as you will be less likely to qualify or be in a position to negotiate the best rate/terms.
2. Have critical documentation easily available and kept up-to-date
Create a secure electronic folder, preferably stored online, that house all of your statutory and financial documentation that funders will request from you when you apply for finance.
This includes up to date copies of your company registration documents, shareholder agreement and register, certified copies of member/director IDs and marriage certificates, tax certificate, signed customer contracts, business plan, latest financial statements, up to date management accounts etc. SME lack of finance readiness (i.e. having their documentation available for funders) is a key constraint to being able to access funding.
3. Know your credit score, both your personal credit score as the business owner and your business’s credit score
Our report shows that 61% of entrepreneurs applying for finance don’t know their credit score, yet this is one the primary evaluation components used by funders to determine the risk of lending money to the business.
It’s important that SMEs request their credit scores and address any issues that are negatively affecting them. You are permitted one free credit record per annum from the Credit Bureau. Take time to learn about how the credit system works.
Access to finance
“There are a number of research studies that confirm the link between access to finance and business growth, showing that increased access to funding increases revenue and job growth in SMEs.”— Darlene Menzies, founder of finfind.co.za