Cash Flow: The Immediate Challenge for Small Businesses

Cash Flow: The Immediate Challenge for Small Businesses

cash flow problems

All businesses have been impacted by the COVID-19 pandemic. Currently, the greatest challenge for small businesses is immediate cash flow.

According to a survey, 94% of small businesses are either in a cash-flow crisis or will be within the next 30 days.

Many small businesses are struggling to pay their employees and meet other financial obligations such as rent.

SMEs ideally positioned to grow

Smaller businesses have the advantage of being more agile and adaptable than larger enterprises.

According to Keet van Zyl, partner and co-founder of Knife Capital, a growth equity investment firm in Cape Town, SMEs need an “action plan to survive, re-imagine the business model and thrive in the aftermath of COVID-19”.

Startups in many sectors could be in a great position to thrive,” said Van Zyl. “They are nimble, innovative and quicker to adapt to the new normal and have a low cost base [compared to corporates].”

Van Zyl says they can “extend their runways” by moving business online or changing what they do and how they do it.

In order to do this, SMEs must consider ways of raising capital to help mitigate cash-flow problems.

How cash shortages are affecting real SA businesses

According to a survey by accounting software firm QuickBooks, 38% of South African SMEs have or are currently laying off employees and 49% are planning to.

Cash shortages are impacting South African businesses in other ways, including the ability to be agile and initiate new ways of operating.

Even businesses that were in good financial shape before the lockdown are suffering.

Consider some examples.

  • An online grocery store and delivery service specialises in supplying Jo’burg offices. The company saw the need to pivot towards making business-to-consumer grocery deliveries instead. However, managing director and co-founder, Lebohang Likhojane, told the Mail & Guardian that the startup simply hasn’t been able to raise the capital.
  • A popular coffee shop in Cape Town’s Southern Suburbs planned to offer takeaway meals as the lockdown restrictions eased. With no revenue for more than two months, the owner can’t raise enough cash to do this.
  • An independent Cape Town hairdresser employs two full-time staff and has three rent-a-chair stylists working in her salon. She had hoped to create “colour care” packs to offer as retail products to clients. The salon has had no revenue for months and can’t access funds to put together or market the boxes.

Getting a loan: pros and cons

Ordinarily, a business might turn to traditional lenders like banks or apply to a range of government and non-governmental funds in order to solve the cash-flow crisis.

Unfortunately, many small businesses don’t qualify for government funds.

Other obstacles may also stand in the way. Examples are:

  • insufficient time in business to provide the required financial history
  • poor or no credit rating
  • lack of collateral
  • insufficient funds to wait for weeks while a loan application is reviewed.

What Pawn My Car offers

We can help your business through this cash-flow crisis by offering a loan against a fully paid-up car, bakkie, truck or boat that’s in your name.

Our loans:

  • are paid out quickly
  • require no laborious paperwork
  • have no effect on your credit rating
  • offer no risk to other business or personal assets.

For more information, contact us on 086 172 9648 or simply complete and submit our online application form.

Complete an application now