Now is the perfect time for SA’s SMEs to take on bigger projects, says Garth Rossiter, chief risk officer at Lula.
“We’re currently in a perfect storm,” he explains. “In 2023, we saw record-high interest rates, unprecedented load shedding, and soaring inflation, all of which hit consumer spending hard. But now, with interest rates expected to drop in September, inflation coming under control, and a long streak with no load shedding, the current business environment may present opportunities to expand, upgrade equipment, or diversify offerings.”
“If you’ve got a solid business that’s survived the post-Covid era, this could be as close to an ideal climate as you can expect for launching new ventures,” he adds.
“Yes, there’s still economic uncertainty,” Rossiter acknowledges, “but that’s often when the best opportunities arise. When sentiment is high across the board, it’s actually not necessarily the ideal time to launch projects. You don’t always want to invest at the peak of the market; you want to invest when markets are turning around or on the cusp of a growth phase.”
This strategic approach positions businesses to capitalise on future demand. “When there’s suddenly a spike in demand for your product or service, you want to be ready for it, having planned in advance, not scrambling to catch up with the competition.”
Cash flow planning is fundamental to business success, yet often overlooked. “80% of businesses fail early on, largely due to cash flow issues,” Rossiter notes. “Our surveys show it’s a major growth obstacle. Many SMEs struggle to get cash flows planned out 3-6 months ahead.
“SMEs need short- and medium-term capital not just as a buffer, but to seize current market opportunities. We’ve supported construction firms, retailers, and eateries with things like building projects, equipment purchases, premises upgrades, and inventory restocks, as well as just to maintain operations and pay salaries. We provide the crucial day-to-day cash flow relief that underpins these big projects in the background.”
When it comes to funding big projects, SMEs often find themselves caught between a rock and a hard place. Traditional banks, with their demand for collateral and extensive credit histories, can be slow and inflexible. “Banks typically take a month or more to process applications,” Rossiter points out.
On the other end of the spectrum are unverified lenders, who might offer quick cash but often without proper affordability checks. “This can put businesses under immense pressure,” warns Rossiter.
He believes Lula has successfully carved out a niche in the middle-ground, with an approach geared towards the dynamic needs of SMEs. “We take affordability and risk assessment extremely seriously,” he explains. “Our algorithm assesses businesses using alternative data, allowing us to provide capital within 24 hours.”
We pre-approve based on affordability, allowing businesses to then access cash whenever the need may arise,” Rossiter expands. “Businesses can dip in and out, with no penalties for taking less than the maximum allowed, thereby freeing up cash for development projects or managing cash flow fluctuations.”
This kind of real-time capital financing facility is a game-changer compared to traditional month-long waits, in the fast-paced world of SMEs. “Repeat business lies at the core of Lula’s model. We’re proud that 80 to 90% of our clients return for additional funding,” Rossiter shares. “This high retention rate reflects our commitment to responsible lending and client success.” He stresses that Lula “wants to see our clients thrive, not just survive.”
This focus on long-term partnerships, and their passion to build thriving SME ecosystems in SA also drove Lula to extend their portfolio of financial services beyond just providing capital. “We also offer a robust business finance support structure, including our SME-tailored banking app, cash flow management tools, and financial education content. Together these tools empower businesses to make informed strategic decisions about credit and cash flow, helping guide them towards sustainable growth.”
“SMEs are the lifeblood of the economy, and the primary engine of job creation in SA. We’re seeing these businesses grow, and we’ve seen employment increase.”
