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The Disruption of Small Business Lenders and Trade Finance

The Disruption of Small Business Lenders and Trade Finance

Businesses, no matter how big or small, have all undoubtedly been affected by the Covid-19 pandemic in one way or another. However, before the pandemic, a large portion of small businesses relied on informal sources of funding.

But, even before the country was hit by the Coronavirus, Fintech companies such as alternative lenders, offering trade finance, asset finance, small business loans, and other forms of alternate funding, had started to disrupt the entire SME sector. Alternative lenders have grown to such an extent that they have become the saviour for countless small businesses over the past 18 months.

While alternative lenders have been on the rise, commercial lenders such as banks have failed to help many small businesses leaving them feeling helpless which has ultimately resulted in these small businesses forced to shut their doors due to the failure to obtain funding and financing from various commercial lenders.

According to the Finfind SA SMME Covid-19 Impact Report, which was published by the banking association of SA, stats showed an estimated 42.7% of small, medium, and micro enterprises might have closed during 2020. Although these findings may not be completely accurate, they do highlight just how devastating the impact of the Coronavirus has been on small businesses, and how the sector has been decimated. This could also be a result of a lack of funding available and the inability of banks to help support struggling small businesses.

As there are two sides to every coin, banks will argue the reason they struggle to help small businesses with funding is due to the lack of business literacy or record-keeping when these SMEs apply for small business loans, trade finance, asset financing, or any other form of funding.

And while banks are trying to adapt their approach towards the SME sector, the emphasis and importance is on us, alternate lenders to keep pushing and fighting to help as many small businesses as possible. With increased fintech awareness in South Africa and the exposure of alternate lending, we need to ensure the survival of the SME sector.

What is Trade Finance

We at Payabill, offer a variety of funding options including short-term local and international trade finance as well as asset financing. Trade finance is a financing product that allows your business to purchase stock upfront with repayment terms over a certain period of time. This allows for a more efficient running of a business’s cash flow and allows for more flexibility.

Benefits of trade finance

• Flexibility: Trade financing is highly beneficial, as it allows lenders to provide a credit facility that can help businesses pay for goods purchased from suppliers. Moreover, the flexibility allows businesses to take advantage of a certain period of time before having to settle the balance of the goods purchased.

• Convenience: Trade financing through lenders such as Payabill can give businesses competitive advantages as a result of the convenient transaction you will be having when you opt for trade financing.

• Security: The security of trade financing will give both businesses and their suppliers less to worry about with regards to transactions. Knowing that maximum security is assured will also improve the relationship between the two parties.

• Transaction Flow: Businesses that make use of trade financing can have access to facilities once a credit line is established between them and lenders.

With local trade finance being our biggest funding line for small businesses it is so important to understand how local trade finance can boost your business’s cash flow position and improve your business’s sales ability. At Payabill, we will always go the extra mile for your business to ensure that your business is given the ability to grow to its maximum potential!

To apply for funding, or learn more about alternative lenders click HERE.