How Can I Get a Small Business Loan in 2021?

Find out what you need to qualify as a stand-out candidate by learning the ins and outs of how to apply for a small business loan in South Africa.



small business loan with iK cash advance
Give your business a boost with iK Cash Advance

 

The South African business sector is an innovative melting pot that doesn’t hold back when it comes to tenacious ventures. There is a tangible buzz that surrounds the hustlers, the movers, and the doers.

Starting a business is tricky. Maintaining one that already exists is a difficult feat, too. Taking into consideration we have been through one of the biggest financial blows our country has seen during COVID19, it’s not rocket science figuring out why so many people could benefit greatly from some financial support in the form of a small business loan.

Anybody who is looking to obtain a business loan is on the right track. It means you’re officially taking the right steps to turn your goals into your reality.

The questions that matter

Before you speak to anybody about getting a small business loan, you need to have a strategic and reasonable conversation amongst your associates or within your stakeholder circle.

Preparation is the differentiator. Ask yourself two important starting block questions:

1. What am I applying for?

Have you just received a contract and need to fulfil a profitable order? Are you looking for equipment and software revenue or applying for starting capital? That’s the foundation you need to build the rest of your proposition.

2. How much money do you need?

Do you need R150 000? Do you need 13 million? By being particular about your production costs, projected expenses, insurance etc. you can come to an accurate number to present to your potential funder.

You must show why you need the exact funds you are asking for. You want to prove you’ve done your research and you’re taking your business seriously.

This exercise is also going to be a time saver. We’re going to talk soon about the importance of choosing the right avenue for your funding. Certain lenders will have strict limitations for what they will and won’t loan out. Knowing what you need and where you can get it from is a smart move.

Think like a funder

To get yourself in the right frame of mind – think like a funder. If you were in the business of investing your finances into a company with a less than 100% guarantee of success, how would you approach the situation?

Risk profile analysis is a massive part of their jobs and best you believe a reputable lender will conduct a thorough review of anybody they are considering loaning money to.

small business loan

What do I need to qualify for a small business loan?

To qualify for a business loan, you need to be registered as a business in South Africa. That’s step number one to being recognised as a legitimate company or service.

More than that, business loan qualifiers come down to proving the (profitable) proposed trajectory of the company. We’ve put together the stand-out points to check off to get the best application outcome. Here’s what you should start getting in order if you’re thinking about applying for a financial loan:

Collateral

Collateral is how lenders secure themselves against losing a lot of money. They want to know that in the event they don’t receive payments from you, they will be guaranteed compensation. Collateral can take many forms such as equipment recall, unpaid receivable invoices, or a blanket lien.

A blanket lien is an agreement that your lender will be able to claim or recall all business assets in the event you consecutively miss payments. Business assets could include any real estate the company owns, inventory or machinery.

Financial statements

The better you can establish confidence in your funders, the higher your chances of a successful small business loan. Take a good look at your bank history to see what transactions and payments are recorded.

Check it before applying and make sure your partners are doing the same.

Admirable credit

That leads us to proving you have a fantastic credit score. Or an acceptable one, at the very least.

Your credit score lets lenders know that you are a reliable person – that you pay the payments you have agreed to pay in a timely fashion. What people tend to forget is that it isn’t only their individual credit score that matters.

The credit score of your business is going to affect the down payments you’re asked for and the interest rates that are offered to you. It all comes down to finding out what your previous financial behaviour has been like.

The same goes for the credit score of all major stakeholders in the business. If any of your partners have skipped on insurance payments or credit card debts, it’s going to reflect on the type of candidate you are.

A business plan

Not only is a business plan necessary for the success of any start-up or an established company, but it’s also necessary for many traditional financers. A business plan is going to communicate your status and your projected financials alongside a comprehensive plan of how you intend to get there.

Don’t let this discourage you from getting the ball rolling. Sometimes it isn’t about waiting for your plan to be perfect, but you need to have your bases covered and a solid vision in place. When you approach a lender, you should ask them for a template of how they prefer their business plans. You can then slot your information into their template for an easier application process.

READ THIS: Looking for help with your business plan? Take a look at this article for guidance and get a FREE business plan template. 

What are receivable invoices?

We mentioned receivable invoices earlier. They’re a beneficial form of collateral if your business is just starting and you don’t have much to offer aside from the money that clients owe to you.

If you have provided a service to somebody and have invoiced them for a future payment, this can be used as insurance for a business loan.

How important is my credit score?

It may be worthwhile waiting to apply for your small business loan until you have cleaned up your credit score. At the end of the day, better financial health makes you a better candidate for a financer.

You can improve your credit score by making sure that all of your accounts are settled, and debts are paid for. After that, you need to prioritise making all of your payments on time so that you have proof of reliability for lenders.

Choosing the right lender

Before putting all your eggs in one basket, you need to make sure you’ve done your research on the best avenue for you and your business. Seeking out a loan all comes down to your specific needs. Are you in the growth stage of your business? In the start-up stage? On the right track but need some financial assistance so you can put capital elsewhere? Wherever you are in your business journey, there is a specific lender out there for you.

Find out if lenders that interest you are currently providing loans in your industry and what experience they’ve had.

Applying for a loan isn’t all about hoping that somebody will pluck you from the heavens. Your business may be new, but it is still very much deserving of the right fit.  It’s also about knowing who is going to be most beneficial to you.

SME lenders

SME’s are the backbone of any economy and it has never been more important to ensure they get the funding they need. Whilst banks and traditional financial institutions may be an option for some SME’s, there are alternative avenues available to uplift small businesses where banks cannot.

Companies that have a knack for innovation and a passion for social upliftment have started offering business loans or cash advances to small businesses. iKhokha happens to be one of them.

How to Get an iK Cash Advance

small business loan with iK cash advance

Everything we do at iKhokha is geared towards uplifting small South African business. We embrace the entrepreneurial spirit of our community and believe that everybody should have equal opportunities when it comes to opening their business.

To qualify for an iK Cash Advance with iKhokha, you must:

  • Be an active iKhokha merchant
  • Have traded for the past 3 months consecutively
  • Trade at least 3 times a month
  • Have completed a minimum of 10 card transactions a month
  • Have completed a card transaction in the last 15 days

Your business performance must also be consistently of a certain standard to qualify:

  • Turnover should be at least R2 500 per month
  • Average monthly turnover for the last 3 months must be higher than R3 125

Once you meet these criteria, you will be able to log onto the iKhokha App to view your custom iK Cash Advance offer. Use the sliding scale to choose how much of it you need. Repeat the process to select your payment term.

Within business 24 hours, you’ll find your custom iK Cash Advance in your bank account to take your business or venture to the next level! Bear in mind this is subject to approval.

Why Should You Choose iK Cash Advance?

Easy payback

We make it easier than ever to pay us back for your cash advance. Simply pay us back using a percentage of your future card sales.

Zero compound interest

You need money to grow your business, which is why we only charge a flat fee with no compound interest. It’s just one of the reasons why 60% of first time iK Cash Advance users take a second iK Cash Advance to further boost their businesses!

Ready to get started?

Are you ready to give your business the kickstart it deserves? Get involved with the iK Tribe to take your business to new heights. Keep an eye on our social media for more insights into being the best business owner you can be.

If you’re not an iKhokha merchant, but you’d like access to an iK Cash Advance. Buy an iKhokha card machine today and get started!

Contributing Writer

Expertise shared from our team of seasoned entrepreneurs, side hustlers and professional writers to help make business easier for you, no matter where you are in your business journey.

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