{"id":547,"date":"2018-10-29T11:38:36","date_gmt":"2018-10-29T09:38:36","guid":{"rendered":"https:\/\/sage-new-clone.local\/en-za\/blog\/?p=431"},"modified":"2026-02-05T11:43:40","modified_gmt":"2026-02-05T09:43:40","slug":"alternative-funding-for-small-businesses","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/alternative-funding-for-small-businesses\/","title":{"rendered":"How alternative funders enable SME success"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-za\/blog\/category\/growth-customers\/getting-funding\/\" class=\"entry-header__link\">Getting funding<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tHow alternative funders enable SME success\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2018-10-29T11:38:36+02:00\">October 29, 2018<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"How alternative funders enable SME success\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-za\/blog\/alternative-funding-for-small-businesses\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-za\/blog\/author\/keirthomasbryant\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2025\/04\/Keir-350x350.jpg\" class=\"entry-author__image\" alt=\"Keir Thomas-Bryant\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2025\/04\/Keir-350x350.jpg 350w, https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2025\/04\/Keir.jpg 600w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Keir Thomas-Bryant<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>Up to 75% of South African small businesses&nbsp;fail within the first year. The biggest causes include a lack of funding or poor financial management. Yet, many small businesses struggle to secure funding, either because they haven\u2019t been in business long enough, or because they don\u2019t understand the intricacies of the lending market.<\/p>\n\n\n\n<p>Alternative lenders are starting to play an important role in small business survival.&nbsp;Marilynn Leonard&nbsp;co-founder of&nbsp;<a href=\"https:\/\/www.fundinghub.co.za\/our-team\/\">FundingHub<\/a>, says matching the business with the right lender will depend on their specific finance requirements.<\/p>\n\n\n\n<p>Speaking in a recent episode of the Sage #SmallBizAfrica podcast, Leonard said some reasons SMEs fail to secure funding include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Not having a compelling reason to borrow money;<\/li>\n\n\n\n<li>Applying for a loan that the business is unable to repay; and<\/li>\n\n\n\n<li>Not being in business for at least a year with revenue under R1 million.<\/li>\n<\/ul>\n\n\n\n<p>\u201cMany small business owners don\u2019t understand that they can only borrow a percentage of their turnover. No lender \u2013 whether a bank or an alternative lender \u2013 will advance a loan equal to their entire turnover.\u201d<\/p>\n\n\n\n<p>Alternative lenders are not registered with the National Credit Regulator (NCR) and cannot loan money to businesses that don\u2019t meet the one year \/ R1 million minimum requirement. These businesses are considered start-ups and would have a better chance securing funding through an equity partner or personal finance, says Leonard.<\/p>\n\n\n\n<p>Research has shown that around 40% of small businesses struggle to access funding because they don\u2019t meet traditional lending criteria, which are not small business friendly.<\/p>\n\n\n\n<p>\u201cSmall businesses have a better chance of accessing funding if they already have all their finances in order.&nbsp;<a href=\"https:\/\/www.sage.com\/en-za\/sage-business-cloud\/accounting\/\">Cloud-based accounting solutions<\/a>&nbsp;can help them pull any finance report they need for their loan application,\u201d says Leonard.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-banks-vs-alternative-lenders\"><strong>Banks vs alternative lenders<\/strong><\/h2>\n\n\n\n<p>Banks should be a small business\u2019s first choice for funding, says Leonard, because they\u2019re the cheapest. But they\u2019re often slow to grant funding because of the checks and balances businesses must complete.<\/p>\n\n\n\n<p>In cases where these businesses need money fast \u2013 for example, to pay invoices or salaries, or to fulfill a purchase order \u2013 alternative lenders are a good supplementary option.<\/p>\n\n\n\n<p>However, the downside of accessing money within a day or two, she says, is the cost of alternative lending. This is why the benefits of accessing funding should outweigh the cost of acquiring it.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tips-for-lending-success\"><strong>Tips for lending success<\/strong><\/h2>\n\n\n\n<p>Before business owners apply for funding, they need to know&nbsp;<em>why<\/em>&nbsp;they need the capital. \u201cLenders won\u2019t just hand over money,\u201d says Leonard. \u201cThey\u2019ll want to know the purpose of the loan, like expanding into new markets or paying salaries.\u201d<\/p>\n\n\n\n<p>Once lenders know why the business needs funding, they can decide what funding product is right for them.<\/p>\n\n\n\n<p>\u201cThere\u2019s been an uprising of alternative lenders in South Africa. It can be confusing, overwhelming, and time-consuming to find the right one,\u201d she says. \u201cThat\u2019s where credit marketplaces like FundingHub come in. We can guide you towards the right lender without you needing to know the intricacies of the available products.\u201d<\/p>\n\n\n\n<p>Credit marketplaces can also help small businesses avoid unsecured lending, or \u201cloan sharks\u201d, says Leonard. \u201cSmall businesses might get excited at the prospect of same-day loans, but they\u2019re often ripped off by high interest rates and undisclosed costs.\u201d<\/p>\n\n\n\n<p>This happens because alternative lenders are not regulated by the National Credit Act (NCA). This makes it even more important to find a lender that realises the importance of self-regulation. She advises partnering with a lender registered with the&nbsp;<a href=\"http:\/\/sasfa.net\/\">South African SME Finance Association (SASFA)<\/a>, which encourages transparent and responsible lending. This is a relatively new association and is gaining momentum among alternative business lenders.<\/p>\n\n\n\n<p>Banks and responsible alternative lenders are also more understanding and accommodating with loan repayment terms, if the business runs into financial problems, she says. \u201cLenders are in business because you\u2019re in business. They want to see you succeed. As soon as you have a problem repaying your loan, talk to them about renegotiating your repayment terms.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-enabling-success\"><strong>Enabling success<\/strong><\/h2>\n\n\n\n<p>Starting a business in South Africa is not easy, says Leonard. One of the biggest challenges facing small businesses is cash flow problems caused by slow or late payers. State-owned enterprises (SOEs) and large corporates tend to be the worst offenders.<\/p>\n\n\n\n<p>\u201cWhen a small business has to wait between 30 and 90 days for payment, they run into cash flow problems and also incur finance charges. At the end of the day, that big order they secured is not as profitable as it could have been. As a result, we\u2019ve seen a surge in products like invoice and purchase order funding.\u201d<\/p>\n\n\n\n<p><mark class=\"highlight-and-share\">Small businesses are starting to realise that alternative funding can be an enabler of their success. It might be expensive but it\u2019s better than losing out on a big deal or not being able to fill a large order.<\/mark><\/p>\n\n\n\n<p>Leonard says everyone has a role to play in enabling small business success. Government should enact policies that establish reasonable payment terms and create funding vehicles that help start-ups through the first tough year. They can then approach alternative lenders for the next round of funding.<\/p>\n\n\n\n<p>The private sector should change their payment terms, especially as they diversify their supply chains to include more small businesses and meet B-BBEE requirements. \u201cIt has to be a collaborative effort. We have to work together to empower the SME space and micro enterprises if we want to grow the economy.\u201d<\/p>\n\n\n\n<p>Small businesses should keep in mind that a loan is technically a business expense \u2013 and capital alone doesn\u2019t guarantee their success. They should also focus on better managing their cash flow through regular forecasts and negotiating payment terms with clients; hiring and outsourcing to the best people; and having a business plan with clearly defined goals and steps to achieve them.<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice enewsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get a roundup of our best business advice in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-84fe79b5-668d-41f8-a0cc-6229018c4ac9\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>\t\t\t\tUp to 75% of South African small businesses fail within the first year. One of the biggest causes being a lack of funding, or poor financial management. Yet, many small businesses struggle to secure funding, either because they haven\u2019t been in business long enough, or because they don\u2019t understand the intricacies of the lending market.\t\t<\/p>\n","protected":false},"author":280,"featured_media":68330,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[30,37,24,31,25,29],"tags":[190,335],"business_type":[2],"lilypad":[],"context":[],"industry":[],"persona":[15,16],"imagine_tag":[90,68,73,85,86,80],"coauthors":[405],"class_list":["post-547","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-daily-money","category-getting-funding","category-growth-customers","category-long-term-planning","category-money-matters","category-trends-insights","tag-funding","tag-making-financial-decisions","business_type-small-business"],"sage_meta":{"region":"en-za","author_name":"Keir Thomas-Bryant","featured_image":"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/07\/resize-1675x1275-46.jpg","imagine_tags":{"90":"Financial services","68":"Grow your business","73":"Money Matters","85":"Small business","86":"Start up business","80":"Support"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice South Africa","distributor_original_site_url":"https:\/\/www.sage.com\/en-za\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/547","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/users\/280"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/comments?post=547"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/547\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media\/68330"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media?parent=547"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/categories?post=547"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/tags?post=547"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/business_type?post=547"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/lilypad?post=547"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/context?post=547"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/industry?post=547"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/persona?post=547"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/imagine_tag?post=547"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/coauthors?post=547"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}