A very large portion of our economic growth in South Africa rests on the shoulders of the small business owner and entrepreneur. It is this sector of the market that will drive growth in employment figures and stimulate our economy.
Finance for small businesses has always been a thorny issue for banks as such a vast number of small companies do not survive the initial start-up phase, and therefore the risk to banks is very high. These are the same small companies that might not hold assets to secure the loans, thereby reducing the risk for the financial institution. Personal surety therefore often becomes a pre-requisite to raise finance for a start-up venture. If the business is not successful, it can often leave the entrepreneur with the responsibility of repaying large loans or overdraft facilities. Huge disparity also exists in the industry currently with regards to lending criteria for financial institutions versus the criteria used by suppliers desperate to extend further credit to enhance their sales. Very seldom are suppliers’ credit lines listed on any kind of credit bureaus, and therefore it becomes increasingly difficult for financial institutions to make a true assessment of a consumer’s financial status when they have their own business or are self-employed.
Moves are afoot by the National Credit Regulator to deal with many different kinds of credit agreements which will influence the way any type of credit facility and even lease agreements are dealt with debt review. If you find yourself in a position where you cannot pay business debt, and you are concerned about the sureties you signed, talk to a debt counsellor to see what your options are.
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