Standard Bank’s Head SME Banking Dennis Isaacs
Dennis Isaacs, Head SME Banking at Standard Bank Namibia, stresses the importance of developing a business plan, planning out costs, and finding the correct loan when starting a business.
“During the early stages, a new business needs funds for start-up costs and working capital. A detailed business plan will give you an idea of how much you need and in which areas. The business plan will also assist you to understand your cash flows over time,” explains Isaacs.
This includes start-up costs, start-up inventory (if the business is sales-based), and assets.
“Finally, don’t forget cash reserves which can be used to support the company during the early months to pay for rent, utility bills, salaries and wages to name a few things,” he says.
He also warns of hidden costs which include interest payments on overdrafts and charges by suppliers for late payments, depreciation of property and equipment, maintenance, commissions and administration fees and employee turnover.
To sort out how to pay for costs, Isaacs recommends calling your bank about loan options and, “Prepar[ing] yourself by taking time to understand the criteria banks will use to judge your business before providing you with finance.”
Isaacs stresses the importance of calling ahead to know what documentation is needed and how the application process works for each loan.
“Standard Bank understands that cash flow is critical and gives you access to working capital. So whatever your business needs, we'll help you choose the most suitable finance,” Isaacs says, as SBN offers several options for individuals looking to start a business including a new SME account.
Standard Bank Namibia outlines some of loan options that Banks offer:
An overdraft is also simple and easy to arrange and helps cash flow management because the cash is immediately available when you need it. You can draw on the funds in your current account up to an agreed limit and only pay interest of the portion that is used. Bear in mind, however, the interest rate on an overdraft is higher than for other types of loans.
A term loan has flexible repayment options (from one to eight years) and is structured in line with your cash flow. This type of loan is ideal if you have big capital expenses and is usually linked to the prime rate. The size of the loan you get depends on how much collateral you have and the repayments can be structures to according to your business’ projected cash flows.
Many SMEs import goods or assets. Trade Finance offer businesses greater immediate cash flow whilst minimizing the risks associated with international trade. The exporter is assured of guaranteed payment and the importer is protected against delays in the receipt of goods or assets. Both parties’ interests are protected through a formal agreement. Trade finance facilities are usually secured and are available for short and long term transactions.
Vehicle and Asset Finance offer loans to buy vehicles or movable assets such as generators or other business equipment. As a business owner you obtain use of the goods without affecting your cash flow and the ownership of the asset or vehicle automatically pass to you once the final loan repayment has been made. Using vehicle and asset finance to purchase vehicles and assets hold two major benefits to business owners. Firstly, the business can claim depreciation on its taxable income in the fiscal year and secondly, rather than saving to buy the vehicle or asset cash sometime in the future, the business can hedge against inflation by acquiring the asset immediately.
Commercial Property Loan offers long-term finance to purchase or build commercial or industrial premises such as a shop, offices or warehouses. The building owner must own both the property and the trading entity which operates from the property.