Banks have long been criticised for failing the small-, micro- and medium-enterprises sector, particularly early-stage businesses, where start-up costs and working capital are among the primary reasons they reach out to funders. But research published this week on funding for small businesses suggests that the blame does not lie only at the door of a seemingly unsympathetic banking fraternity. Many small-business owners lack knowledge on the workings of the credit system or do not know their credit score, despite the allowance of an annual free credit record check. The research also found that many struggle with financial record-keeping and are unable produce up-to-date documents or manage cash flow properly. These hurdles are compounded by traditional credit scoring and collateral-seeking lending methods employed by banks. These methods favour medium to large businesses, creating a never-ending cycle of underfunding for SMMEs. The study - the South African SMME Access to Finance Re...
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