Transcript Document
SMME CONFERENCE STELLENBOSCH
RATIONALE FOR SEFA DIRECT
o Historical performance in SME funding by private sector initiatives have shown shareholder expectations, return considerations, low risk appetite resulted in minimal investment in SME’s o From outset Government acknowledge that commercial banks were reluctant to provide comprehensive services to SME market more especially to Black emergent enterprises o Government recognised this and put in place measures to encourage the banking sector to increase its small business lending o Though the wholesale model has achieved some success over dependency on profit driven capacity to achieve developmental objectives will not work effectively o Khula Direct was established to address the above limitations
PRODUCTS AND SERVICES
o WORKING CAPITAL LOANS o ASSET FINANCE: o TERM LOANS o Product availability is subject to terms of credit approval o An applicant may apply for more than one type of facility subject to a maximum exposure of R3m per client
QUALIFYING CRITERIA
o o o o o o o o o o o o o Owner managed business. Business activity must be in Republic of SA Business must have profit motive and economically viable Forecast cash flow for 1 st year must show ability to repay Individual holding the controlling interest must be a citizen of the Republic of SA Borrower with proven and sufficient entrepreneurship, knowledge, skills and experience directly related to the nature of the business It is advisable that the entrepreneur provide own contribution to the best extent possible Compliance with all relevant laws and regulations Demonstration of job creation Impact on geographic location of business (rural/peri-urban/disadvantaged areas) Exposure to client: R50K to R3m All race groups with specific emphasis on small rural and peri-urban towns All entrepreneurs with a viable or potentially viable formal business will be considered for financing. Each application is considered on its merits and on potential profitability
Who qualifies
o o o Any size enterprise may apply provided it falls within the definition of a SME Applicant may take any legal persona. All directors (or Equivalent) and their partners are required to sign personal suretyship The following are the exclusions o o o o o o o o o o Any business involved in illegal trade Any business involved in unlawful activities Any business whose trade or operations may prejudice the good standing of sefa Any political organisation or Non Profit Organisation People under debt review Any business having directors (or equivalent who are un-rehabilitated insolvents Any business having directors or shareholders who are mentally incapacitated Sin Industries (tobacco, Liquor, Gambling, Sex Trade) Speculative Real Estate Property Development.
TOP TEN TIPS
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Be realistic, prepare thoroughly and be confident Balance of Power and timing Clarity of information: current, clear, concise Articulate what you are looking for in an investor Clearly set out what the investment proposition is Clarity of strategy and track record – explain Variances Identify key competitors, their strengths and weaknesses – be realistic Management team – They are a large part of what people are investing in House Doctor- Present the business in its best possible light 10.
Map out the process and follow it 11.
GOOD LUCK
DO’S AND DON’TS
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DO
Demonstrate that you understand your market (market size, purchase criteria, market needs) Provide a realistic analysis of the strengths & weaknesses of main competitors & substitutes Explain precisely how you will gain market share (sales and marketing strategy) Provide detailed financial forecasts – Profit and loss , as well as key assumptions Ensure that funding structure selected is appropriate to the business Be prepared to have ‘skin in the game’ (cash, collateral, personal sureties, time & energy) • • • • • • • Be realistic in terms of expectations (valuation, sales levels, expenses, margins) • Emphasise relevant knowledge, experience & track record
DON’T
Make inconsistent statements, misrepresentations or exaggerate Try to over gear the business (take on more debt than the business can afford) Give an unprofessional presentation Be vague about how you will obtain sales and secure market share Confuse profit and free cash flow Forget to shop around, there are numerous prospective sources of financing to choose from
A ROAD MAP
• Prepare up to date financials, business plan etc • Research potential investors (desk top and speak to people • Approach them together, ideally get more than one interested and try to progress your discussions in parallel • Get to Heads of Agreement (agreement in principle as quickly as possible • Push for completion but take nothing for granted • After the deal look after your investor and work with them – it is a very small world
LOOK AT IT FROM INVESTORS POINT OF VIEW
• • • • • • The investment has to be attractive to the investor , a good commercial return for the risk Investors have different appetites for various types of risk eg early stage, expansion, industry sector, geography etc – do your research As a minimum they will look for your: • • • • • • • Financials Business plan and expansion strategy Management team Sales Profile – how realistic is it Competitors Entrepreneurs track record Assessment as to how manageable the investment is, can they work with and influence the business Investors have their own internal investment process eg Investment committees these cannot be circumvented – you cannot change the rules.
Be prepared for a lengthy process and respond in a positive way to requests for information If you are unsuccessful ask for feedback and learn from it – take it in good grace it is a (very) small industry
WORKING RELATIONSHIP
• • • • • • • • You have to be able to work with the investor on an ongoing basis They will want to protect their investment – not hand you a blank cheque Work with the investor not against him Look at the strategic value-add and business experience they can bring Provide accurate information on a monthly/quarterly basis – financial, sales, new business leads etc Clearly establish the governance (Board of Directors) and schedule board meetings – keep an accurate record of these meetings and decisions If the relationship with the investor starts to misfire address it, if necessary ask a third party to try to help Ensure there is a clear agreement at the beginning as to how the relationship may (if necessary) be terminated.
THANK YOU
WHERE TO FIND ME
ERROL GARDNER REGIONAL MANAGER 12 th FLOOR, MAIN TOWER STANDARD BANK CENTRE HEERENGRACHT, CAPE TOWN TEL: 021 418 0126 MOBILE: 083 303 0544 E-mail: [email protected]