The South African funding and credit system is inhibiting small to medium enterprise (SME) growth and liquidity, which depresses job creation and productivity, widens inequality and weakens long-term GDP and tax capacity, while increasing enterprise failure and informality.
The credit system asks small businesses to prove themselves with financial statements that are out of date and meet credit scoring requirements that are exclusionary and limiting.
A company with a February year-end that applies for funding in December is being assessed on data that’s ten months old. While this is how most company credit works in South Africa, it is the primary reason why SMEs are rejected for finance and funding.
In ten months, a lot can change, particularly for the SME. Sales fluctuate with seasonality, Interest rates and inflation move, and when supply chains shift under geopolitical pressure, the businesses that adapt fastest are the ones that protect their revenue base and find their next customer before the gap even opens. Old financial statements don’t reflect this versatility or volatility and are almost entirely meaningless as a basis for making credit decisions.
Management accounts are the conventional stopgap, but they have their own limitations. When they do exist, they can be inaccurate, prepared without the care and rigour that go into financial statements, and are delivered in a structure that few lenders can read consistently. While they theoretically fill a gap, they aren’t clean and structured enough to provide an accurate picture of an SME’s financial status.
The problem isn’t solved by transparency either. In the United Kingdom, for example, every registered company’s financial statements are publicly filed and freely accessed through Companies House, but they remain at a minimum three months out of date. Visibility doesn’t fix an information problem when timing is the real challenge.
Unfortunately, in South Africa, most SMEs are excluded before they reach the point of providing their documentation. Some have no financial statements, no accountant, no cloud accounting package and no audited data. This isn’t necessarily down to poor management or a failing business but rather is the result of every available hour going into running the business. The unintended consequence is that young, fast-growing companies are locked out of traditional finance at precisely the moment when capital would compound purely because they have not formalised their reporting.
As the 2025 South African MSME Access to Finance Report highlighted, outdated assessment models routinely disqualify viable applications and there is a dire need for the reform of traditional credit scoring and a move towards open finance and alternative data. Even as macroeconomic conditions improve, lenders continue to apply stringent terms on SMEs which is impacting their growth and liquidity.
However, there is a move towards alternative credit scoring with live transaction data such as bank feeds, digital payments and point-of-sale activity supporting lending decision-making. According to the IFC there is a ‘new generation of credit scoring models powered by alternative data and AI refining credit scoring for borrowers who lack formal credit histories’.
The alternative to sluggish, traditional systems already exists within the SME as living data from bank accounts and accounting software solutions that generate continuous, current records of how a company is trading. They reflect the income coming in, going out, whether customers are paying and whether revenue is climbing or slipping. This data describes the business as it is today and provides a clear and genuine indication of how well it is likely to perform tomorrow.
This is the principle that Bridgement was built on, assessing the facility on live financial data not on historical filings. In a market where most SMEs don’t have financial statements in order, this distinction can make the difference between access and inclusion.
Key insights:
- 10 months: How out of date a financial statement can already be when a February year-end business applies for funding in December.
- Financial statements not required: Bridgement funds businesses on live accounting and bank data, not historical filings.
- R330m: Committed by Standard Bank and Rand Merchant Bank to expand Bridgement's SME lending capacity, backing a model that funds businesses on live data rather than historical statements.
- R2bn+: Deployed to South African SMEs by Bridgement since launch, across business loan, revolving credit and invoice finance products.
- 3 of 3: Bridgement is the only SME funding provider in South Africa integrated across all three leading cloud accounting platforms: Xero, Sage and QuickBooks.
- 2 minutes to apply, same-day decision: Versus the weeks a traditional application can take, because the assessment runs on data the business already has rather than documents it has to produce.
In their own words:
" A business could have a February year-end and apply for funding in December, and those financial statements are already ten months old. A lot can happen in ten months. Seasonal sales fluctuate , inflation changes, there can be supply chain disruption, the business could lose a key customer. If it has pivoted or changed since then, that information is close to meaningless." — Daniel Goldberg, founder and CEO of Bridgement.
" Live financial data tells you exactly what is going on in a business right now, today, and gives a real indication of future performance. Financial statements only tell you what was happening up until the last year-end. If a business has them, great, we will look at them, but they should not be the thing that decides whether a good business gets funded." — Daniel Goldberg, founder and CEO of Bridgement.
