Factors influencing entrepreneurs’ ability to access finance from banks

The Africa SME banking conference currently taking place at the Sandton Convention Centre hosted by the IFC, a member of the World Bank Group today heard Graham Erasmus, Head of Sales, Channel & Segment Management at Nedbank who gave a talk on the challenges and common factors influencing entrepreneurs’ ability to access finance from banks.

“It’s always a daunting task to start any business, with the constant reminder that most businesses fail to access funding from banks due to and amongst other reasons, gaps in business plans, proven viability that an idea can work, inadequate cash flow projections and lack of business skills,” says Erasmus.

According to research conducted by an independent company BMI and the competition commission into retail banking, statistics indicate that only 24% of startup businesses are funded through banks while 49% through an entrepreneur’s own savings. Further research illustrates, that the main constraints faced by entrepreneurs when starting a business are related to crime and corruption, fear of business failure, the escalating cost of electricity, access to finance, skills and training.

“More importantly, the critical success factor to help enable entrepreneurs succeed is highly dependent on practical and expert advice. While the majority of entrepreneurs attend industry and bank seminars, only a few have a mentor or coach to help them see it through. Training to up skill entrepreneurs through effective management, business planning and financial cash flow provides an opportunity to support small businesses. We welcome government’s focus to meet key national objectives in entrepreneurship growth and job creation to address some of the challenges faced by the SME sector,” states Erasmus.

In countries such as Brazil and India where government plays a highly facilitator role, entrepreneurship has become the major driver in those economies. With South Africa recently becoming a member of BRIC, this is set to provide greater market opportunities. Successful entrepreneurship can certainly benefit from collaboration between government, banks and the SME sector.

“For the seventh consecutive year, Nedbank continues to provide free small business seminars across the country, mentorship, business registration, free transactional banking, free financial training for franchisees and an online networking portal aimed at growing the SME sector in South Africa for the much needed growth of our economy,” concluded Erasmus.