Entrepreneurs face a myriad of challenges, especially when it comes to managing their finances. It’s a topic often avoided, with many business owners leaving it to their bookkeepers. But as the decision-maker, the responsibility ultimately falls on you. No matter how daunting finances may seem, your business’s success hinges on your ability to manage money effectively.

It’s easy to get caught up in the day-to-day operations of your business and overlook financial management. However, understanding where your business stands and what you aim to achieve is crucial. Additionally, securing the right amount of financing is essential; you don’t want to be underfunded or burdened with excessive debt.

Research by Company Partners revealed that in 2020, nearly 730,000 businesses missed out on funding opportunities due to a lack of financial records, stifling their growth potential. Interestingly, only 6% of new small, medium, and micro enterprises (SMMEs) rely on business loans for startup capital, with 44% using personal savings instead.

Vignesh Subramani, the Head of Sales SME at ABSA and a seasoned professional in the financial services industry, recently shared some valuable insights during a Twitter Space discussion. With a background in Retail Banking and expertise in Portfolio Management, Financial Risk, Business Relationship Management, People Management, and Customer Service, Vignesh was the right person to speak to. Here is our discussion:

What are some of the things business owners should focus on?

It is important to get the value of the funding right. The second thing to consider is getting the funding at the right price, depending on what kind of funding mechanism you will use. The next element is to structure it in the right way. So if we think about business expansion, or acquiring equipment or an asset, you want to make sure that funding is structured in the right way and that you don’t put the business under unnecessary pressure. The last thing is to ensure that you get the funding from the right type of lender.Sometimes we get funding that might hurt us in the long-term. It is very important that you work with the right type of lender.

Where do most entrepreneurs fall short most of the time?

Number one, it is always important to have your business plan up to date because it includes so many of the crucial elements for securing funding. Things like budgeting, what your cash flow looks like, and whether your accounting records are up to date. These are some of the things that banks look for. But also, what I have noticed is that there is a preconceived notion about what banks look at to fund a business. I think the best thing is to go through that process, engage with your bank. You might find that in some instances, because you have built a certain track record, the position your bank will have towards your business might be different. And you will find that they might be able to help your business. I think it’s important to engage with your relationship manager.

What are some of the funding options that business owners could explore?

There are quite a few funding options available for business owners. If you think about it from a banking perspective, we have quite a few options. If you are looking to expand your business, there are funding options available. If you are looking at bridging your cash flow, we understand that businesses use their financial resources to develop orders for their customers. And they have to wait for a certain period of time before they can receive payment. It is very important to understand your cashflow cycle, and it is very important to know when you will need a cash flow bridge in a facility like overdraft or working capital to pay. 

You also need to make sure that your business has enough of a buffer. For things such as vehicle finance or other assets, entrepreneurs always assume that they should acquire that with the cash that they have on hand. Instead of doing that, rather do it via an assets finance solution. So that you can hold on to that cash for other purposes of the business. Ideally, you want the asset to pay itself off over the timeline of that funding option.

The most important thing is to engage with your bank to assess the need for your funding and match it. Because if you get the match for the need for funding wrong, it could be detrimental to the growth of your business.

Do you consider the demand, and the industry that a business is in? For instance, currently there is a need for renewable energy.

Yes, we do consider that. Currently, there is a bounce back energy scheme that was launched last year, specifically for businesses that are investing in their own energy security to reduce the impact of load shedding. You have got to consider those carefully. We have a team at ABSA that looks after renewable energy. We have a number of specialists that make sure all the installations are done properly. We are all about building the resilience of businesses.

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