View this email in your browser

Growth Surge News #23: Post-Lockdown SME Funding

Hi Greig

COVID-19 has radically altered the business funding landscape, especially for smaller enterprises. Some investors and programs have suspended new applications, while many new relief initiatives have been introduced to keep SMEs afloat.

What can we expect as lockdown restrictions get lifted and our economy re-opens?

#1 Empowerment-exclusive government funding

Long before COVID-19, there was a clear shift towards government funding getting aligned to empowerment policies. A valid B-BBEE certificate has been mandatory for many government agencies for years, and some investors (e.g. the National Empowerment Fund) finance black entrepreneurs exclusively.

The various COVID-19 relief funding programs introduced by government bodies are simply an extension of this trend. Both the Department of Tourism and Department of Small Business Development have insisted on treating B-BBEE compliance as an application requirement.

The president himself has spoken openly about using COVID-19 to reconstruct the economy so that it is “inclusive, empowering to women, young people and to black people in the main”. The funding implications appear obvious: government finance for SMEs will increasingly and explicitly prioritise target demographics.

Going forward, I expect majority black ownership to become a mandatory qualification requirement, essentially transforming every government lender into an extension of the National Empowerment Fund. However, in addition, I expect more nuanced empowerment requirements, with funding programs positioned exclusively for women, youth, or rural entrepreneurs.

#2 More innovative commercial funding

Many specialist investors and fintech solutions have emerged to capitalise on the SME funding failures of traditional lenders. COVID-19 has dealt them a curveball: how do you finance an inherently high risk market when the immediate future is so uncertain and fluid?

Their only option is to adapt by innovating further. I expect we will see even further specialisation (e.g. investors that only fund specific sectors or projects) as well as creative investment structures (e.g. mezzanine debt with quasi-equity earn-outs). Some lenders (e.g. Spartan Finance) have already begun.

The advantage for small business owners is that they will be able to choose from more nuanced funding solutions. However, a growing selection of increasingly novel or sophisticated options may make it harder to find the right investment partner, and may also drive up finance costs.

Until next time, take care

Greig Whitton

If this newsletter was interesting or useful, please share it on:

Facebook | Twitter | LinkedIn | Email

Do Your Clients Need Business Funding?

We partner with dozens of government agencies and private investors that specialise in small business finance to source funding for growing SMEs.

Whether your clients are looking for growth capital, asset finance, or a working capital facility, we would love to help them find the best possible deal. We handle all of the heavy lifting so that they can focus on their business.

Need Emergency Funding Due To COVID-19?

COVID-19 Loan Scheme For SMEs

Debt Relief Finance Scheme

Business Growth Resilience Facility

Sukuma Relief Programme (currently suspended)

Giving For Hope

COVID-19 Black Business Funding Solution

COVID-19 IDC Distressed Funding

COVID-19 Essential Supplies Intervention

South Africa Future Trust

UIF Temporary Employer/ Employee Relief Scheme

We will update this list every week.

Please contact us if you want us to prepare, submit, and project manage funding applications on your behalf.

You signed up or gave us permission to email you, but we don't want to send you unwanted email. Click here to stop receiving ALL email from us.