Bad Entrepreneur

I get to read quite a lot of negative commentary about SA banks – specifically the big four (Nedbank, Absa, Standard and FNB) – and the way that they deal with small and micro enterprises (SMMEs).

The main comment that is made is that big banks “don’t understand” small business but this seems like a really generic comment and doesn’t help them improve what they are doing.

If I sum up the comments and try and take some of the emotion out of it these seem to be the main criticisms which are levelled against these institutions:

• They don’t lend to small businesses
• If they do offer to lend, they require high levels of collateral and don’t take risks with entreprreneurs
• It’s too expensive for small businesses to borrow from banks
• Banks hound entrepreneurs when they don’t make their repayment commitments

I am not going to try and influence this debate yet but I am going to make some observations and then maybe let the blogosphere and contributors to this blog give their input about what they expect a bank to do to better support small businesses.

• FNB has brought a number of innovative technology solutions including Instant Accounting and potentially PayPal
• Standard Bank is putting a lot of effort into initiatives in the franchising sector and small business networking
• Nedbank is supposed to be bringing a technology driven solution along to compete with PayPal (not totally sure how that is going to work)
• Absa has been throwing money at a couple of grassroots initiatives but don’t really seem to have a “small business identity”
• Sasfin is supposed to be “the bank for entrepreneurs” but you never really see them doing much visible in the sector

So my question to you is:

1. In your opinion which SA bank is doing the most to supoprt small business?
2. What are they doing well?
3. Which products have the most benefit to you as a small business?
4. What could they do to better improve their offering to you as an SME owner?

We’ll rustle up a bottle of something nice for the blogger with the best comments so go wild.

Remember – this is not a bank bashing exercise, this is an attempt to come up with constructive criticism to support the sector. Let me know.

Brett Commaille over at InVenfin took great pleasure in hearing how I was rejected and ejected from micro-lender Capitec today in favour of the security guard who works in the parking lot at the Cresta shopping mall.

I’m not going to bore you with all the details but in a nutshell I was looking for a short-term loan to pay off some software development costs I wanted to push through.

Being a Capitec shareholder and having never tried out their service offering I strolled into the bank, took my seat in the line and waited to speak to a consultant – somewhere between the security guard and the guy who washed cars at Audi.

Now to put my visit in context I’ve interviewed Riaan Stassen (Capitec CEO) before and he’s regularly told me that they are aiming to target the middle-class market so I thought I must fit in to this category. It only took a few suspicious looks I was getting from the consultants to know that I wasn’t their idea of “typical” client.

After a few minutes one of the consultants came up to me to ask me what I wanted. When I explained my requirements she shook her head and told me that because I was effectively “self-employed” I would not fit their lending requirements (remember they are charging 30%+ interest).

Please could I move on so they could service people who were gainfully employed and had a pay-slip to prove it…

… and that dear reader is what you set yourself up for if you decide you are going to bootstrap an SME.

Having hit every single source of credit to feed this monstrosity we created, I think I have felt every emotion under the sun while watching this start-up get put together. Even now where things are starting to come right and the blocks are falling into place, I still love and hate every single minute of the adventure.

To be ushered out of Capitec a few days after Standard Bank approved a R1m bond for my new house is probably one of those experiences which will stay with me for a long time to come.

I wanted to write this post for two reasons. Firstly I wanted to entertain but secondly I hoped to highlight to other would-be entrepreneurs what they are potentially letting themselves in for when they make the decision to take the plunge.

Personally we made a lot of mistakes when we set the business up. These are mistakes we are still feeling 5 years down the line. A big mistake is that we made our business and personal balance sheets one and the same.

In humble conclusion – if you are planning to start a business I hope you remember the blog about the dork who got sent on his way from Capitec in favour of the security guard who leads a desirable and predictable life… at least now you know what you are letting yourself in for.