Black-owned qualifying small enterprises – QSEs – are actively being sought out and supported as suppliers in order to meet scorecard requirements, following the introduction last year of the Preferential Procurement sub-element in the revised B-BBEE codes. With government’s approximately R500-billion annual procurement budget-spend kicking in at the beginning of April 2016, these suppliers are in even greater demand.
However, Andrew Maren, CEO of Ecsponent’s business finance company, says while this is positive, access to funding remains a key hindrance to growth and sustainability within the SMME sector. Meaningful growth among small business start-ups will therefore, require the launch of alternative more accessible funding solutions.
“The reality is that growing start-ups often don’t meet the stringent lending criteria enforced by banks and many other credit providers, and these institutions are more inclined to put resources in small businesses in their later stages of development.
“Typical obstacles small businesses face to obtain funding include inadequate collateral on the part of the entrepreneur, a lack of credit history, and in certain instances the inability to produce an acceptable business plan in line with the financial institution’s criteria.
“This means that without the capital to fund procurement purchase orders, it is doubtful that these small businesses can remain both profitable and be able to deliver to clients on budget and in time,” he comments.
Maren says that it is for these reasons that many niche business credit providers are seeing the value in offering alternative business funding solutions, allowing small businesses to continue growing and operating profitably in the small business procurement space.
“While banks and other credit providers will look at the track record of the business and the applicant, Ecsponent considers only the transactional risk. In other words, where small businesses have a contract, guaranteed cash coming in, know what their profits are, but are simply unable to raise capital from mainstream banks and alternative credit providers,” he explains.
It is this alternative funding offering that he believes will make a significant contribution in mitigating procurement risk when it comes to start-ups operating in both the government and private sectors.
“From an operational perspective, ultimately procurement and supply chain officers are looking for guaranteed on-time delivery of a quality product or service. Our partnerships with SMMEs not only provides a hundred percent funding, but our seven day turnaround time means the delivery turnaround time is greatly enhanced, which is a critical factor in supply chain management. In addition to funding, we also provide ongoing feedback to the organisation contracting the small business in terms of ETAs and turnaround times.
“However, for me perhaps the biggest advantage to accessing these funding solutions is that growing SMMEs will not miss out on any lucrative opportunities. Instead, they will be given the helping hand required to assist them on the road to becoming profitable and sustainable businesses,” he concludes.