Niche SMME financiers are far more flexible in their approach than the large banks and other lenders. For instance, they are often prepared to consider funding you even if your loan application to banks was rejected. Another plus is that they work with you to structure the loan to suit your business needs whereas large lenders tend to impose the terms of the loan on the borrower. However, this flexible approach can come at a cost. Niche SMME financiers can be more expensive than banks as they need to cater for the higher risk of their investment portfolio.
This module explains what Niche SMME financiers are looking for and it will help prepare you to make an application to the relevant lender. Don’t forget to take the finfind Finance Readiness Quiz. It assesses your finance readiness status. If you are not finance ready, you’ll get useful hints and tips on what you need to do to get ready. If you are finance ready you’ll be linked to a list of lenders that match your needs.
There are 5 crucial things that a Niche SMME financier wants to see before they will lend to a business:
At a bank, approval for loans is dependent upon the finance approval committee’s view of the documents you submit. You do not get to meet them or have the opportunity to discuss issues with them. Niche SMME financiers, on the other hand are very keen to meet you.
Since they are prepared to consider funding applications that the banks have turned down, they would like to hear your explanations about the issues that caused the loan to be rejected. They understand that no business is perfect and difficult situations can arise despite the best planning. How you answer these questions gives them insight into your management capabilities, your integrity and so on.
Furthermore, they also want to form an opinion about you as a business owner. Essentially they look to see whether you are capable of running your business successfully as this will be their guarantee that they will get their money back.
In short, Niche SMME financiers meet you and evaluate:
The documents you submit are there to back up your discussions with the Niche SMME financier. It isn't enough to have your accountant prepare these documents and submit them, you will be expected to be able to explain each one in detail.
Here is an idea of documents that you will need to compile:
Invariably niche financiers will want to see a detailed business plan. Write the plan for the people who will read it. If they can read your business plan and know exactly how the business operates, who does what to make it run and understand its past and future then you have done a good job.
Some lenders insist that you use their template for the business plan, so if you don’t already have a business plan, check before you start developing one. The list below shows the items usually required in a business plan:
If you are hoping to use the finance for a major expansion, or change of direction in your business, then a formal business plan outlining these plans will also help to boost confidence.
Only if you have business assets of less than R1 million does the NCA apply to you. This means that the lender needs to do a strict affordability test to see if the business can afford the finance. Bear in mind that the NCA stipulates that the lender may consider the ability of the small business to use the finance to raise an income as part of its affordability test. This means that if you can clearly show how the finance will improve the revenue earned by the business, it may improve your chances of being approved for the loan.
Finfind provides its services free of charge to businesses seeking finance. Our primary purpose is to link SMEs with all the relevant finance providers and finance products that match their funding needs. As a matching service we are not required to be a registered finance provider as we do not loan money directly.