THE CREDIT crunch created by the turmoil on the global markets had placed an additional squeeze on business owners waiting for payment from goods and services they supply to larger companies.
George Watson, managing director of New Business Finance, a company that lends to small business owners, said it been “increasingly noticeable in the last month” that large companies were taking longer to pay those entrepreneurs he lent finance to.
He pointed out that corporates had in many cases stretched their usual payment period of 30 days on receipt of invoice to 60 days.
Watson said the financial crisis had lead to his company taking a “closer look” at applications for finance when deciding whether to fund deals or not.
“This is not a period for expansion, it’s a period for consolidation,” emphasised Watson, who believed the credit crunch would last “well into next year”.
Yet despite this he pointed out that the current instability on the markets represented an opportunity for some business owners who were well managed and financially sound and could compete on price and efficiency.
This was echoed by Jo’ Schwenke, managing director of Business Partners, who said the financial crisis was a good time for some businesses to break out into the market as demand had dried up and businesses could probably get things at a better price.
Sibongiseni Ngundze, managing director of Nedbank’s small business services, advised business owners who were looking for finance to sharpen their selling skills and to first look for alternative sources of business.
This could for instance involve seeking out the opportunities created by those businesses in an entrepreneur’s particular sector that might have closed down or missed payment deadlines.
Only as a last resort, he said, should the business owner look for funding. But even then they should consider sourcing funding from shareholders first before approaching the bank.
He said Nedbank had built in additional measures for those looking for finance from the bank and had also become “more robust” in testing a loan applicant’s cashflow.
Pointed out Ngundze: “You really have to have your business robust to access credit.”
One business owners whose small Cape Town-based publishing firm, was currently experiencing a growth despite the financial crisis, is Monika Elias.
Elias runs the World’s Favourite Publications which publishes various tourism publications including the monthly tabloid Wine Tourism News.
She believes it is because she is able to move quicker than larger companies and because she had less overheads that she is able to undercut more traditional magazines.
While she admitted the last four years setting up her business had been “hell”, she said her current growth had been buoyed by the wine industry’s demand for a marketing outlet and the hype leading up to the 2010 Soccer World Cup.
“If think if you’re an entrepreneur you just have to keep on going,” said Elias, who said despite the high interest rates she was now looking to buy a vehicle for her business.
Exporters may stand to gain with the weakening rand, but Vinya Kumar, who co-owns Pacific Paper Technologies with Dev Varyani, said the current financial crisis was “like a two-edged sword” for their business, which distributes paper products to African countries like Kenya, Cameroon and Mozambique.
He said though the drop in the rand’s value would increase their business’s profitability, their sales numbers are set to decrease as customers he said, were “holding off” during this time of market instability.
This article appeared in Business Report on 23 October 2008.
Stephen Timm is a