Individuals and businesses need money to cater for their needs. Sometimes they might have low cash flow to get things done. Small Medium Enterprise (SME) loans help businesses to expand their businesses. These loans help them keep operating with little to worry about financially. What SME loan means, how it works, how to qualify, etc. are all-inclusive in this article.
What you should know about SME loans in South Africa?
Small and Medium Enterprise (SME)loan in South Africa is the type of loan small and medium businesses can get to fund their enterprises. Besides that, the SME loan provides a single line of credit for meeting the borrowing needs of small and medium enterprises. Businesses can use such loans as working capital and for long-term requirements.
How do SME loans work?
You must know how a particular loan package works before you can apply. This knowledge helps the borrower (individuals or businesses) make financial decisions forehand. The following are how the SME loan works in South Africa:
- Apply for the SME loan
You can apply for the SME loan online, fill the form online, and follow the prompts. You can also visit your lender’s office and request for the loan. Then give them the basic details they need about you and your business.
Thereafter, their South Africa investment team will review the pre-evaluation form that you will submit.
- Business check
The South Africa investment manager of your lender will probably assess your business. They will highlight key risks and opportunities to make your business ready for investment.
- They will approve your loan
After assessing your business, they suit your application to a committee for review. Once they approve it, they will offer you the loan, usually in a goal letter.
- Disbursal of funds
They will disburse the funds to your business once you formally accept their offer.
- They support your business
You will have continuous value-adding business support focusing on your business’s needs. They will support your business in order to enhance the success of your business while helping you implement your business plan.
- Last installment and help for your business growth
Their formal involvement with your business ends once you pay your last installment. After that, they can help you review your business plan. Also, they can help discuss any further finance and support you could need in keeping with your business growth needs.
See also: How to access bridging loans in South Africa.
How can my business qualify for any SME loan in South Africa?
Your business has to qualify for the SME loans before they can give you the loan. This is because the lenders have specific criteria that businesses must meet before they can get the loan.
The following are the usual criteria for SME loans qualification:
- Your personal and business credit score must be good. A credit score of 650 and above would be good
- Prepare and possess a financial statement and management accounts
- Have a minimum of 2 to 3 years experience of running your business
Companies that lend money to businesses in South Africa
There are some companies that offer business loans to businesses. Not all financial institutions offer this type of loan. This could be because of the enormous amount of loan businesses can use to cater for their needs.
The following are the companies that lend business loans:
- Fincheck
- Lulalend
- Finder
- Merchant Capital
- iKhoka
- Zande Africa
- Bright on Capital
- ProfitShare Partners
Conclusion
The role that SME play in South Africa is very important to the economy. SME boast creating about 47% of the workforce in South Africa. Besides that, the National Development Plan (NDP) estimates that the country has to create about 11 million jobs by 2030. And for that to happen, 90% of these jobs would come from the SME. Millions of South African citizens have jobs in SMEs. The SME loan provides businesses with the financial backup to keep their operations going, especially when they do not have enough cash flow.