Access to capital ‘key for SMEs’
ACCESS to capital for small, medium enterprises (SMEs) was key for South Africa’s economic recovery, Lulalend chief executive Trevor Gosling said yesterday.
Gosling, also the co-founder of Lulalend, an online provider of short-term business funding, said the firm had seen a 35 percent uptick in its weekly average growth-focused funding requests – like investing in inventory, purchases of equipment, investment marketing and increasing the staff based on permanent or temporary basis – compared to the second quarter.
Lulalend said in terms of loans issued under level 1 versus the second quarter, it had seen a 76 percent uptick. Gosling said customers that were on restructured advances in June were around the 57 percent level but were currently reduced to 35 percent. With more rapid production, Lulalend expected that within the next three to six months, as long as Covid-19 did not surge again, most of those businesses would be able to trade out of that restructure. “About 48 percent had just indicated funding growth throughout. This gives us optimism going ahead into the holiday season as well as into next year.”
The Covid-19 pandemic and the resulting global recession had dealt a severe blow to the local SME sector. According to a McKinsey SME Financial Pulse survey published in July, 70 percent of SMEs were already cutting back on expenditure and retrenching staff. By the end of the second quarter, Statistics SA reported 2.2 million job losses.
A number of industries within the SME sector in various key industries were severely hit by the national lockdown, especially mainly travel, hospitality, off-line (non-essential) retail, consumer goods manufacturing and construction.
Gosling said SMEs saw a significant drop in sales revenue across all sectors.
“Based on our SME survey data collected in July, 94 percent of businesses had suffered more than a 50 percent drop in monthly turnover, with 75 percent of our clients indicating that they had seen more than a 75 percent drop in revenue.”