Each year, the World Economic Forum releases the Global Competitiveness report, which ranks countries around the world according to various criteria associated with their ability to compete internationally. This year, South Africa has dropped from 22nd to 32nd place in terms of the ease of obtaining loans.

Not just in South Africa but around the world, banks are imposing tougher criteria for approving loans than they did in the past. The financial crisis of 2007 and 2008, the global recession that followed and associated tightening up of the legislation that governs bank credit have all contributed to more restrictive approaches to lending.

In this context, it’s often small companies looking for fast business loans that suffer most.

Challenges for small businesses

With its high unemployment rate, South Africa depends on successful entrepreneurship for economic growth. Unfortunately, conditions in the country are far from encouraging for entrepreneurs and small business owners.

Among the factors adding to a high failure rate for small businesses are:

• government hurdles in the form of complex paperwork and tax requirements
• high costs of labour and local supplies
• lack of appropriate training and skills
• last but not least, difficulty in accessing funding.

Startup and small businesses are especially vulnerable to fluctuations in cash flow. Even businesses based on the best of models, with good growth potential and valuable assets, can fail fast due to sudden cash shortages.

South African bank advertising might lead you to believe that our banks are practically throwing money at entrepreneurs with good ideas, in the interests of lending a helping hand (or at least with a vision of future profitability). In practice, banks are more focused than ever on controlling their risk levels.

Business owners who need quick business loans to make it through rocky patches or to capitalise on opportunities are increasingly being disappointed, with banks applying time-consuming loan approval processes and making it harder generally to secure business loans.

Alternative ways to get fast business loans in South Africa

In countries like the United States and the United Kingdom, the non-bank lending industry has grown hugely as banks tighten up their approaches to lending. In South Africa, we’re just starting to catch up.

Alternatives like asset-based lending may make it significantly easier for startup and small businesses to survive, by making it possible for them to access funds quickly and easily. There’s less paperwork and funds are made available almost straight away.

This type of funding may be enough to see a business through a tough spot or it may serve as a bridge, keeping a business afloat or enabling it to act on an opportunity while a traditional bank loan is still being approved and finalised.

Either way, the challenging business environment in South Africa means it’s time to recognise the value of non-bank lending. Especially for small businesses, the short-term liquidity provided by asset-based quick business loans could be key to survival.