Alan Shannon, head of Nedbank’s Small Business Services division, on SME financial packages, business solutions tools and the importance of support for small companies


Q: What challenges do SMEs face in securing finance?
A: As a commercial bank, we see SMEs facing a number of challenges, including an ability to evidence a successful trading track record, which would support the servicing of additional/new funding, and being able to demonstrate that they’re significantly financially invested in the business.

It’s a bit of a double-edged sword but investors, and certainly banks, want to see entrepreneurs being well-invested financially. It’s a function of gearing, and while there’s no exact rule of thumb, bankers in particular don’t want to be the only ones putting their capital at risk.

Small-business failure rates, regrettably, are high – this means that commercial banks need to be thorough in the credit-assessment processes, which essentially attempts to determine a SME’s ability to service and sustain the funding it requires. Such thoroughness can be perceived as conservatism, but our need to generate a respectable return on (and preserve) our shareholders capital necessitates this approach, which will ultimately disqualify certain businesses from being able to source funding.

Such an approach is also borne out by the findings of the Nedbank Small Business Index, which earlier this year revealed that small-business confidence in SA has decreased dramatically in the first half of 2017 because of the technical recession, political and economic uncertainty, and the impact of the 18-month drought.

At 43.2%, the confidence score is currently at its lowest in four years. A year ago, businesses expressed concern around their current financial situation, which they rated at below 50% for the first time since the inception of the index.

Q: Where is financial assistance most needed in terms of operations of SMEs?
A: It really depends on the particular part of the business life cycle an SME finds itself in. Getting started probably presents the most challenging phase to access finance. Commercial banks are, generally speaking, not geared to provide start-up funding. We’re very effective at helping businesses expand, and this type of funding is in high demand – small-business growth can otherwise find itself being contained within what the shareholders themselves are re-investing into their business growth.

Small businesses with even a brief track record of profitable trading growth will do well to partner with a commercial bank to facilitate the step change in growth they aspire toward.

Q: What are the advantages for SMEs in securing finance from Nedbank?
A: As a bank focused on small business, Nedbank offers a comprehensive range of innovative business solutions for small businesses and their owners – supporting and guiding businesses in their financial decisions; equipping entrepreneurs with the right tools for managing and growing a business; and lowering its administrative burden.

Whether a business is just starting up or is already established and set to grow, we have the solutions that enable us to partner with entrepreneurs and help them take their business further.

The holistic approach we take caters to the financial needs of start-ups as well as growing and established businesses across a wide range of industries and professional practices. For example, we provide business owners with access to a dedicated relationship banker (supported by a credit environment that understands the needs and challenges of small business) at the location of their choice. The relationship banker is there to support and guide business owners with various financial decisions, equip them with the right tools to manage and grow their business, and lower their administrative burden.

Industry specialised/customised offerings (franchising, agriculture and public sector) are also available through Nedbank’s Business Banking division. But our real success story is SimplyBiz, the recently revamped online portal that offers small businesses a voice and allows entrepreneurs to network and find practical information that helps them start, run and grow their business.

Q: Does Nedbank offer any tools specifically for small businesses?
A: Nedbank has created a suite of innovative and branded solutions and applications, including business registration services; merchant analytics tools; working capital with flexible repayment terms; small-business receipt of card payments via smartphones; payroll programmes; budgeting and tracking tools; accounting, quoting and invoice programmes; and an essential guide for small-business owners brochure, covering all aspects of starting a business.

As a money expert, Nedbank is committed to the success of our clients by offering coaching and mentoring to enable entrepreneurs to take their businesses forward. This is evidenced by our many sponsorships and partnerships over the past 10 years, aimed at giving small-business owners the skills and support they need. In addition, the enterprise development programme has helped entrepreneurs internally and throughout specific industries via its SME incubator and mentorship programmes.

Q: What are the requirements for SMEs to obtain such finance, and is it capped?
A: There are no caps. Requirements depend on the need. At basic level, we require entrepreneurs to evidence a successful trading history, no matter how modest. This normally comes in the form of an annual set of accounts and, depending on the age thereof, a set of management accounts demonstrating the most recent trading period.

We’ll assess the business performance against the requirement and make our own determinations regarding the extent to which we’re able to support the requirement. Most importantly, we want to determine the serviceability of the finance, and what the provision of finance will mean for the prospects of the business.

Q: Are you seeing any trends within the small-business market?
A: Data is not readily available but on an anecdotal level, we see many tender start-ups and entrepreneurs attempting to enter the marketing and services sector, where entry costs are relatively low – specifically in terms of the initial capital costs. However, the Small Business Index, which surveyed 800 businesses in the first half of 2017, highlighted key challenges that were negatively impacting their cash flow outlook, including the deteriorating economy, slowing revenues, late payment challenges and high operating costs, particularly that of utilities.

As it stands, 66% of businesses surveyed are operating below capacity. The index shows that the negative sentiment is pervasive across all industries. Words used by survey participants to describe the current business climate were particularly emotive, with descriptions such as ‘pathetic’, ‘frustrating’, ‘uncertain’ and ‘fear’ entering their lexicon. But there is still hope.

Headcounts of small businesses remained resilient despite challenging conditions, with 62% of businesses indicating that their headcount has remained constant (an increase of 10% from 52% in H1: 2016). Looking ahead to the next 12 months, 69% of small businesses indicated that they intend keeping their headcount constant (an increase of 9% from H1: 2016), showing a high level of commitment to employees despite the difficulties they face. In the context of widespread job losses across key industries, the contribution of small businesses to employment is even more critical.

Q: What can the private and public sector do to support SMEs?
A: Nedbank believes the index offers stakeholders an opportunity to explore ways in which they can solve the challenges they face. Now more than ever, the partnership of a bank as a money expert is required to help small business see money differently.

As a trusted partner, Nedbank encourages small businesses to contact their banking partner to help them manage risks, address liquidity pressures, and identify growth opportunities in these challenging times. One resounding conclusion can be drawn from the index results – efforts by the private and public sector must be accelerated to ensure that small businesses, which are the backbone of our economy, do not feel alone.

Q: What is Nedbank’s value proposition for small businesses?
A: As a bank committed to business, Nedbank’s enterprise development programmes are focused on SMEs, as they are the engines of economic growth and job creation. In the past three years, Nedbank has provided more than R56 million in enterprise development assistance to emerging black SMEs, helping some 2 000 entrepreneurs with mentoring, skills development and other interventions aimed at supporting their success. During our participation in the recent industry-held transformation hearings, accelerating the development of SMEs was identified as a key priority, one that Nedbank is fully committed to.

Furthermore, Nedbank’s participation in the recently constituted BASA task team as well as other industry initiatives such as the SME Fund support this national imperative. We believe in the power of partnerships, joining with clients to help them on the journey to success, because inevitably this means boosting the economy and creating jobs. Whether starting a business, running an established business or looking to expand, small businesses need a reliable, affordable banking partner that understands the challenges of business and responds with flexible solutions for small-business needs.

Q: Any specific solutions or services that facilitate access to finance and/or business support?
A: Nedbank has a suite of payment, investment and finance solutions, as well as industry specialisation and services that extend beyond banking. This year, Nedbank contracted with Finfind, an online one-stop solution for access to finance for small businesses. It provides business owners seeking funding with the ability to improve their readiness for finance, including educational tools and links to various financial solutions that best suit their financial needs.

This partnership extends further value by linking potential clients to a dedicated team in Nedbank’s Small Business Services division, in order to assist clients by facilitating their requests in the most effective way. Successful clients will also receive the benefit of a dedicated relationship banker that will serve as a business advisor for both their business and personal financial needs.

By Kerry Dimmer
Image: Hanlie Huisamen