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Lulalend is now Lula. We have a new name, a new look, but we're still your friends in funding 😃.

Transforming the way SMEs grow

Transforming the way SMEs grow

There are overwhelming statistics that show that small businesses (also known as SMEs, SMBs or SMMEs) contribute between around 63 percent to the GDP and 60 percent of employment in South Africa. (Kongolo, 2010) There’s no denying – SMEs play a crucial role in developing countries with major employment and income distribution challenges. This is particularly true in South Africa.

Small businesses are vital to our economy, but they struggle to get on their feet and once they do; they struggle to grow and flourish into bigger and better businesses. These businesses are the underdogs of our economy. They are often the ones that are in the trenches getting their hands dirty and working hard to overcome the unique challenges they have to face. These types of businesses are our economy’s success stories and the statistics show that they have the potential to make a real impact.

SMEs create a powerful knock-on effect. There are up to 3.5 million of them nationally. 37 percent of these are considered formal, registered businesses. If each of these is able to grow they create more job opportunities. As the business ramps up they can empower their employees with opportunities that extend much further – affecting their families and immediate communities. The great thing about SMEs is that they can provide training and skills development over and above employment opportunities. Whether you completed your schooling or not, or had the opportunity to study further at university, SMEs provide opportunities for those with various degrees of education. And with these businesses forming across all industries, from construction and trade to technology and hospitality, there are all kinds of jobs and opportunities out there.

A basic calculation for SMEs

Let me give you an example of the ripple effect I’m speaking of. If we take 200 000 of say 667 433 formal SMEs and estimate that as a result of business growth each of those is able to employ 2 more people in a year – that’s 400 000 new jobs created in one year alone. Now let’s imagine that of those 400 000 new employees 25 percent of them have a child that needs schooling. Let’s assume that the 400 000 now have a steady income and can provide schooling for their children – that’s 100 000 children educated because job creation made it possible. Over the years these children also become the next generation to contribute towards our economy, maybe starting SME businesses of their own. See where I am going with this? A cycle is created that solves not only employment issues but so much more.

How can we help make business growth possible in this sector?  

One of the biggest reasons small businesses struggle to stay on their feet is a lack of access to finances. They are what is known as the ‘missing middle’. Micro-financing is there to assist kiosks and other micro businesses. Banks and traditional lenders are there to assist the big guys, but there is a lack of access and opportunity for this missing middle.

Becoming aware of this issue stirred up a desire to want to help, which is why I started Lula. With a background in financial services, and having founded and run businesses of my own before, I knew that this lack of access was a critical issue that needed a solution.

I wanted to be able to provide an online funding application process that was accessible to SMEs. I wanted to make it easy to apply for and be able to provide funding that was immediately available to businesses within days. At this point I ran into one of my first hurdles – I needed an expert developer with the business and technological know-how to help develop and make this possible. Through what I like to call a ‘serendipitous’ moment I was introduced to Neil, Lula’s CTO and Co-founder.  Together we started to build a business on the belief that we could make a difference.

We knew that we could help to grow a sector if we helped to grow the businesses in that sector. And that’s exactly what we’ve set out to do by providing the missing middle with access to funding that traditional lenders aren’t willing to give (never-mind in the short space of time we look to give it).

We’re constantly learning and understanding the risk of a small business – it’s what keeps me up at night. But I’ve seen that small businesses can be successful with our help and I’m excited to be a part of SA’s first dedicated SME banking and funding platform.

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