Banking Support for Entrepreneurs

One of South Africa’s major banks recently announced increased levels of small business support, beyond what is normally expected from the banking industry. As one of the major stakeholders of the small business industry banks have for years benefited in many ways from the boom in entrepreneurial activity, often providing very little but high interest rates and tough terms to especially new businesses. In South Africa, small businesses account for about 40% of economic activity and provide a massive 60% of employment. Looking at the stats makes it easy to understand why banks would want to appear as small business friendly and this move hence comes as little surprise.


Nedbank Small Business Services recently announced that it is now offering a number of banking and nonbanking interventions to assist entrepreneurs as well as national social transformation. Business registration is a key focus area and the bank offers entrepreneurs the ability to register as a formal business entity through any Nedbank branch. 
The entrepreneur will simultaneously be able to register a business and register for 
value-added tax. 
The bank does not earn anything from the registration, but merely plays a facilitation role by using its technology to allow entrepreneurs to link with service providers, such as com-
pany registration business SwiftReg.

Enterprise development is also a focus point for the division and it has partnered with government financial institution Khula Enterprises to enable entrepreneurs who have inadequate collateral access to finance.



Further, Nedbank has noticed that South Africa has gone from being a largely resource-based economy to emerging as a sales-type industry. 
More Internet and service driven businesses, are emerging and there is a move away from heavy retailing to an emergence of manufacturing and a large services component in the country.

South Africa of course has a large range of business support organisations, with a real culture of entrepreneurship starting to develop within our nation. South Africans are naturally entrepreneurial, both from a necessity point of view as conditions for finding employment has been challenging for many years as well as from an opportunity perspective where the rich mix of races and cultures have brought about a wealth of idea and resulted in a breeding ground for entrepreneurs.

The bank says that they have started to play more of a facilitation role by using its technology to allow entrepreneurs to link with service providers, such as company registration business SwiftReg.

Together with the various other nationwide service providers such as SEDA, the IDC, SA Business Plans, Business Plan Software and the Investors Network we are confident that entrepreneurs in South Africa have a wealth of support that they can rely on and that, going forward into the next decade entrepreneurship will play an even bigger role in the growth and sustainability of the country.

The Business Plan

Just why the business plan has become such an important part of the business financing process in recent years comes as little surprise. Using the latest in business plan software products makes writing a business plan fairly straightforward. Very seldom do we find that entrepreneurs are all-rounder’s and have skills and experience in all the different functional areas of the business. Most often the potential business owner may have both an interest and experience in a certain area and for that reason that they may have come up with a solution to a current problem or challenge that he/she may have come across.

Most entrepreneurs are in essence advanced problem solvers and due to their strong self-belief and resourcefulness may take their solution further to the point where a new venture is created. Think about eh entrepreneurs that you know, consider their ideas and you will quickly see that they have really come up with a solution for either themselves, or someone they may know, whether that is a friend, customer or family member. So the point I’m making here is that the solution obviously comes from their area of expertise, plus of course a healthy serving of imagination and creativity.

When it comes to the actual starting and running of the business, numerous other skills are also involved, whether those are marketing, finance, operational, customer service or service delivery skills seldom would you have thought through the processes involved in addressing these areas. This is where the business plan becomes such an important issue.

Banks and business investors are very well aware of the large failure rates for start-ups. It’s their business to understand the risk that they are taking on and hence believe that one way for the risk to be managed is to ensure that the entrepreneur have actually through thought the various issues while engaged in the process of writing he business plan. The plan will require you to look at just about everything from marketing, to ecommerce, operational aspects, sourcing suppliers and even the legal issues involved in starting and running your business.

It’s a pity then that too often today, the only reason why someone may draw up business plan would be to comply with the demands from the bank or investor as it really can serve as a major tool to ensure that the all too often mentioned business failure rate can be improved and more entrepreneurs can make a success from all the initiative, energy and capital that goes into starting a new business.

Necessity Driven Entrepreneurs

After an interview almost three months ago, I recently found this great article on Necessity Driven Entrepreneurs, and as always, happy to be mentioned.

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Academics call them entrepreneurs motivated by Push factors. We call them necessity-driven entrepreneurs, they have different motivations than opportunity-driven entrepreneurs, and yes, we’re seeing more of them.

Ben Botes, director of program and service delivery at the South African Investors network in Gauteng, said the organization, which encourages would be entrepreneurs to start businesses, has seen so many people who have been laid off that it started a business start-up support program that regularly attracts 30 t 40 people who are looking for a helping hand with both the writing of their business plan as well as the crucial are of finding start-up finance. In 2009, attendance at the Centre’s “Exploring Entrepreneurship’’ sessions in Johannesburg, Durban, and Cape Town almost doubled in numbers from the previous year.

Barbara Nkosi was among the dozens of first-time entrepreneurs filling the seats at a beginner’s business seminar at the center. Nkosi said her job as an executive assistant will go away in March, when her employer, moves to another province and she has to find a way to make ends meat.

“Nobody is hiring,’’ she said. “I’m here because I’m taking care of my own destiny.’’

Sarah Buchannan from Durban who, between her and her husband, between them have decades of experience at local architectural and design firms, started getting together informally with a group of fellow designers and strategists last summer, after both were laid off.

“Initially, we just wanted to share our situation,’’ Buchannan said.

The group of eight women decided to collaborate, starting a business to offer clients multiple services, from print and architectural graphic design to strategic marketing. That led them to an investors network meeting.

“Because of the economy, we’re seeing more entrepreneurs who are pursuing opportunities because they don’t have to take that leap from a secure job,’’ Botes said. “They are already out of work, so why not pursue something that you’re passionate about?’’

“The people who were laid off ahead of us, none of them were getting jobs,’’ Barbara recalled. “So we knew we had to come up with a new plan, to beat the bad economy.’’

The couple honed their skills in the latest, most sophisticated 3D visualization software available, the kind that architects use to pitch projects. They also established ties to a large community of 3D designers locally. One good sign for their young business: they landed a big job before they even had a chance to print business cards or launch a website.

“It’s a little scary, but exciting at the same time,’’ Sarah said. “We’re trying to see this as an opportunity to turn adversity into an advantage.’’

John Gosling, their business coach said his advice to those planning to start a business for the first time is to give themselves “an honest self-evaluation.’’

“You should really be building on your experience, your skill sets, and your interest,’’ he said.

But he cautioned that entrepreneurship is “not a quick fix’’ for unemployment, adding that while he tries not to be “a dream crusher,’’ he often advises unemployed would-be entrepreneurs not to regard a start-up idea as 'fix all' solution.

“Even successful start-ups often don’t generate significant income for two or three years,’’ he said. “In fact, many require a significant investment up front.’’

The entrepreneurs are hoping that their fledgling enterprise will be able to overcome some of the issues that bedevil start-ups. The principals will work in “virtual teams,’’ from their home studios so overhead costs will be low.

Still the two first-time entrepreneurs admit that after years working in architectural firms, they are in unfamiliar territory as they plough through the documents that a new business requires.

They are also working through a business planning “homework assignment’’ from their SA Business Plans consultant that includes a business plan, a financial plan and a sales forecast.

“They each could have gone out on their own,’’ said Botes, “but they are better off as a team.’’

But he added that the group still has to fine tune its business plan, and possibly reduce the number of graphic services they will offer.

“They have a pretty good shot,’’ Botes said. “But it’s still a long road they have to travel.’’

Business Plan Competition draw 6000 Entries

The now annual business plan competition organised by Enablis, First national bank and SEDA, have so far this year drawn a massive 6000 entries from hopeful entrepreneurs, hoping to gain access to the almost R50 mil in prizes and start-up capital provided by the sponsors.

The competition launched in 2006 is increasingly sponsoring larger numbers of entrepreneurs to support entrepreneurship oin South Africa, job creation, the small business sector and of course the wider economy.

Jane Steinacker of Times Live writes:



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Despite the almost 50% contribution that the small business sector makes to the output of the South African economy, the sector's contribution to GDP and employment, its growth has stagnated at about 5% for the past three years, says Heather Lowe, head of enterprise development at FNB Commercial.

Lowe believes that it's not only South Africa's culture of employment and entrepreneurship that is at fault, but also small business's limited access to funding and support.

Lowe says early-stage development finance is missing, adding that South Africa has a limited pool of angel investors and venture capitalists to help stimulate the sector.

In an attempt to stimulate the sector, the bank and other institutions with an interest in SME development have for the past five years clubbed together to host what has become the largest business plan competition in South Africa.

Organised by the Canadian-based entrepreneurship development NGO Enablis, the 2009 FNB Enablis Seda Business Launchpad competition offers winners preferential access to a pool of R50-million in funding, as well as a goodie bag that includes a new laptop and bag, Microsoft office software, Microsoft training voucher and Enablis membership.

In its first year the competition received 500 entries.

Five years later, 6000 hopefuls in 10 industry sectors submitted business ideas for consideration.

This year the competition went online, and entrants needed simply to fill in a business plan template to enter.

Long-winded business plans were not necessary. Additional support was provided by the small enterprise development agency (Seda), whose offices assisted entrants with their submissions, says its executive manager for corporate services, Kaybee Motlholoa.

The South African Institute of Entrepreneurship waded through the entries and supplied the competition organisers with a short-list.

"Of all the entrants, about 2500 went through for judging," says competition director Martin Feinstein, adding that if the plan submitted was "worth something, it was going to get somewhere".

In its first year the competition had five winners. This month 19 winners were chosen, and this number is expected to grow. "The day is not far off where we will get close to 100 winners, provincially and nationally," says Feinstein.

This year's winners are spread across South Africa, from Sello Moloantoa's electrical business in Pretoria to Elana Marie Snyman's theatre stage props design and manufacturing business in Stellenbosch.

"We believe we can assist the winners with both financial and non-financial support to accelerate their path to success," says Feinstein, who calls upon the services offered by the sponsors of the competition to assist.

These include FNB, the lead sponsor and funding partner, the Seda, Microsoft, Khula enterprise finance, Gauteng Enterprise Propeller, Western Cape provincial government and Red Door, Mpumalanga provincial government, Eastern Cape Development Corporation, SA Institute for Entrepreneurship, Softstart BTI, Raizcorp and INSEAD, which is the mentorship partner.

Enablis and its partners continue to invest in the competition with a view to assisting as many entrepreneurs as well as 18 to 24- year-olds who Feinstein believes have "bleak prospects for the future".

"We want to help entrepreneurs build sustainable businesses for themselves," he says.