Securing business funding is one of the most important steps a growing small or medium-sized enterprise (SME) can take – and it’s also one of the most misunderstood processes.
The right funding, secured quickly and at the right time from a reputable organisation, can unlock new opportunities, strengthen cash flow and set you up for long-term growth.
Being ill-prepared or one wrong move can delay your business’s growth and set you back.
If you’re an established SME looking for guidance on how to fund your business, it’s advisable to follow a few basic dos and don’ts when applying for small business funding in South Africa, and get clued up on the top five reasons funding applications get declined.
Equipped with this information you can rest easy that your funding process won’t have unnecessary delays and, worse, jeopardise your business’s growth.
The Dos: How to Successfully Apply for Business Funding in South Africa
1. Make sure you meet the minimum requirements
Before applying for small business funding in South Africa, ensure your business ticks the basic boxes for eligibility. A responsible business lender, like Lula, which is registered with the South African SME Finance Association (SASFA), may turn down promising applications because the basic application requirements are not met.
“The most important first step may sound simple, but it’s crucial. Make sure your business is properly registered and meets the minimum requirements for funding,” says Sideeq Deschamps, a Senior Credit Analyst at Lula. “It sounds simple, but many applicants often overlook it.”
To apply for small business funding through Lula, your business must meet a few basic requirements. These include:
- Being a formally registered business, such as a private company or a sole proprietorship
- A turnover of at least R40,000 per month or R500,000 per year
- Having a clean, current credit report
- Have at least three months of business bank statements
2. Assess your business funding needs carefully
Don’t apply for more business funding than you need. Although it may be tempting to push the limits, responsible business growth financing starts with knowing how much you need, what you’re using the money for, and how much it will cost you to repay.
Lula offers funding of up to R5 million, which can support short-term working capital finance needs and larger-scale expansion, such as opening a new branch or investing in property and equipment.
Responsible business growth financing is about precision, not just access. It’s about applying for the right amount of capital at the right time and for the right reasons. Understanding the impact of every rand on your business is crucial.
3. Check your credit profile
Your personal credit report matters as much as your business’s financial health – and understanding both is key when seeking business funding.
Deschamps recommends running your own credit check before you submit an application. “This helps you anticipate how lenders view your financial history. If you’re aware of issues and take steps to resolve them, this will work in your favour,” says Deschamps.
4. Ensure you are tax compliant
Responsible lenders will check that your business is compliant with local revenue services.
This is why it’s crucial to be in good standing with the South African Revenue Service (SARS) before applying. Outstanding VAT or PAYE obligations can negatively impact your financial standing, and staying up to date with SARS also demonstrates good financial discipline and reflects positively on your financing application.
5. Do your homework on funding providers
Not all small business funding providers in South Africa operate with the same level of care and integrity, and some may not even hold the appropriate accreditation. Lula is a SASFA-accredited fintech firm that provides fast and flexible funding solutions through a secure digital platform.
“We’re not a bank. We care. We’ll look at the whole picture – your credit, your bank statements, your plans for the future – and we’ll do a proper assessment,” says Deschamps.
6. Choose a growth-focused business funding partner
The funding provider you choose can mean the difference between successful growth and credit that keeps your business back. A reliable business funding partner cares about your success and can help you make realistic funding decisions aligned with what your business can afford.
The Don’ts: What Could Derail Your Application
1. Don’t apply when your cash flow is already in crisis
The best time to apply for SME funding is not when you’re in a difficult situation, but rather when your finances are stable. A healthy cash flow reassures lenders that you can manage repayments, whereas an overdrawn account may indicate a higher risk.
2. Don’t submit incorrect documents
Avoid delays that come with the incorrect paperwork or incomplete applications. This is a surprisingly common reason that small business funding applications get declined.
Lula Credit Manager Chantelle Honiball says it’s common for small businesses to have some overlap between personal and business finances, but it’s critical to provide the correct documents.
“If you’re asking for business funding, but submit a personal bank statement, we can’t assess your application,” Honiball says. “It really pays to make sure the bank statements are in your business’s name.”
3. Don’t apply without a clear plan
Even if the lender doesn’t explicitly request it, you should always know how to fund your business wisely and responsibly.
This starts with having a clear, defined purpose for the capital you’re seeking – whether it’s for inventory, equipment or bridging a cash flow gap. While a formal business plan isn’t a prerequisite for a funding application with Lula, having a clear idea of how you’ll use the funds can strengthen your case and help guide your growth.
A clear plan shows that you’re not just applying for capital, but making strategic use of business funding to support long-term sustainability.
4. Don’t ignore non-traditional lenders
Traditional banks may appear to be the most accessible avenue to obtain funding for your organisation, but that doesn’t necessarily make them the best solution.
Alternative credible lenders, like Lula, have turned lending on its head, offering fast decisions, minimal paperwork, and SME-focused support. By not limiting yourself to banks, you open yourself to agility and ease perfectly suited to a small and growing business.
5. Don’t overextend your business
Avoid taking on too many loans at once, and be cautious about applying for business financing to fill a growing income gap. This is one of the most common and dangerous business loan mistakes: borrowing beyond your business’s means without a repayment strategy.
“One of the hallmarks of Lula’s offering is a careful evaluation of affordability and working alongside small businesses to help them responsibly grow their businesses. Sometimes, this means offering loans that don’t overextend a business and instead protect them and help them grow,” says Deschamps.
Alternative Business Funding Solutions Supporting Business Growth
After carefully considering the dos and don’ts of accessing and managing business funding for your business, it’s time to choose the right lender that can help you achieve your business growth goals.
Our Revolving Capital Facility and Capital Advance are fast and flexible alternatives to traditional business loans. They can give you access to up to R5 million in funding within as little as 24 hours.
Revolving Capital Facility
Our Revolving Capital Facility is a line of capital you can draw down from whenever you need business funding. After undergoing our affordability assessment and credit check, you don’t need to reapply each time you draw down from the facility (though a credit check is performed to ensure responsible lending). A Revolving Capital Facility is perfect for helping make cash flow to aid and sustain ongoing business growth initiatives.
Capital Advance
Our Capital Advance is a fixed-term lump sum of capital that is repayable over a fixed term. After you’ve been approved you’ll receive your funding and can repay over the agreed period. Costs are fixed and don’t change. This is a good funding solution if you need a quick capital injection to make a large equipment purchase or fund a project.
Apply for business funding online today in minutes and experience business-class solutions tailored to your business.
The Value of Working with the Right Business Funding Partner
Lula’s goal is not to fund businesses simply for the sake of it. Instead, it’s to provide fast, flexible business funding that fits the specific stage of the company to support sustainable growth. As a SASFA-accredited lender, Lula is committed to responsible lending and offering support during and beyond the application process.
“Our first-ever customer is still with us today, 10 years later,” says Honiball. “They started small with a realistic advance, and today have a facility worth many multiples of that. We’ve grown together, and we’re incredibly proud to continue to call them a customer.”
With digital-first processes, quick decisions, and a full-picture view of your finances, Lula offers the kind of small business funding South African SMEs can rely on – not just as a once-off, but as they grow.
Lula’s funding solutions include a Revolving Capital Facility, which offers flexible access to working capital, and a Capital Advance, ideal for once-off costs like inventory purchases or expansion. Both are designed to meet the needs of growing SMEs at different stages of their journey.
Apply for funding online today and experience business-class solutions tailored to your business.
