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Funding Company news South Africa

Room for youth businesses to grow in SA, tips on how to secure finance

In the challenging world of owner-managed businesses, it is understandable that only a minority are operated by young entrepreneurs, but youth have certain advantages that can boost their participation in South Africa’s most exciting business community. This is the opinion of Lawrance Ramotala, area manager for Business Partners Limited’s mid-Johannesburg region.
Room for youth businesses to grow in SA, tips on how to secure finance

“Although only about a third of all finance applications that pass over the desks of Business Partners Ltd’s investment professionals are from young entrepreneurs, there is in fact no shortage of entrepreneurial types among South Africa’s youth. It’s a stage-of-life thing. Most are hard at work gaining knowledge by studying or working for someone else, gathering resources and building networks for starting their own businesses. Many are working below the radar on side hustles that will one day bloom into fully-fledged businesses. But even so, there is room for the numbers of youth entrepreneurs in South Africa to grow,” he says.

According to Ramotala, the key is technological adaptation. In this ever-changing business landscape, largely influenced by technological innovation, youth entrepreneurs are more inclined to thrive in this environment. This is visible in Business Partners Ltd’s hybrid digital-paper-based finance application process - older entrepreneurs tend to apply on paper, while younger entrepreneurs tend to be at home applying digitally using Business Partners Ltd’s online platform.

“Such ease with technology gives young entrepreneurs an opening in the business world. With the rapid pace of technological change, any business, from the smallest takeaways to the most sophisticated manufacturing outfit, can be improved by applying the latest technologies. By tweaking production systems, client interaction, marketing or administration with a new technology, a business can bring costs down or improve its client experience, giving it an edge in even the most competitive market.”

However, Ramotala cautions young entrepreneurs against making the mistake of thinking that new technologies will allow them to ignore business basics. No matter how revolutionary the new technology is that an entrepreneur wants to apply, the universal principles of business success still apply, including the importance of planning, having an understanding of finance and cash flow, familiarity with the compliance regime, and the ability to work with people - employees as well as clients.

As he asserts, one of the reasons for unsuccessful finance applications by young entrepreneurs at Business Partners Ltd is a lack of formality and compliance. “Even if the application meets all the other important criteria for a successful application, including a viable plan and a dynamic entrepreneur, it will be sent back if the business does not comply with the laws and the rules of its industry. A restaurant not only has to be tax-compliant but must also abide by local regulations governing hygiene and liquor. It is crucial, therefore, that entrepreneurs become compliant as early as possible, as it makes growth so much easier.”

Another major reason why many young entrepreneurs’ funding applications are not successful is due to a lack of understanding on the part of the entrepreneur about exactly how the funding will be used in the business to unlock value and what the impact of it is likely to be on the bottom line. “Too often young entrepreneurs approach Business Partners Ltd with an urgent need for funding in order to fulfil a big order or to capitalise on an opportunity, but often cannot explain exactly how the funding they are applying for will be used optimally in the business.”

As Ramotala concludes, “A good, basic business plan is the answer in such cases, preferably drawn up by the entrepreneur themselves, or at least understood deeply and in detail by the entrepreneur. This raises the spectre of another disadvantage of young entrepreneurs - limited knowledge and experience. It is by no means an insurmountable obstacle but does not require formal business training to overcome. Any combination of finding work experience in the relevant industry, ongoing learning, trialling the business as a side hustle on a small scale, and teaming up with a business mentor.”




Business Partners Limited
We're Business Partners Limited, one of the leading business financiers for viable small and medium enterprises (SMEs) in the world. We provide business finance ranging from R500 000 to R50 million to established entrepreneurs with a viable formal business. The finance we provide can be used for expansion, working capital, asset finance, takeovers, commercial property, revamps, management buy-outs or to buy a franchise.
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