Financial services firm Finfind has published a new report indicating how Small, Medium and Micro Enterprises (SMMEs) bore the brunt of the nation’s COVID-19 lockdown.
The study, which was published in partnership with the Department of Small Business Development and some business groups, is based on a survey of 1,489 businesses across every major segment.
The data shows that in the first 5 months of lockdown, 76.2% of businesses surveyed experienced a significant drop of revenue.
35.2% had cash reserves saved, and of these, 62.6% thought their cash reserves would last between 1 and 3 months. But, just 29.2% of businesses were confident they could pay expenses the next month.
Existing debt, outdated financials, lack of cash reserves, inability to operate during lockdown, and no access to relief funding, forced the shutdown of 42.7% of small businesses.
Surprisingly, just 47.9% of businesses that closed had applied for COVID-19 relief funding. But, virtually all (99.9%) of these funding applications were rejected, according to Finfind.
Whereas the outlook for the future is largely uncertain for SMMEs, 76.7% of the business owners who were able to stay open, are optimistic about being able to survive come 2021.
Just 32%, however, believe that they will be able to create new jobs, a significant alarm bell during an extraordinary unemployment crisis, Finfind added.
“Access to funding remains top of the list of challenges reported by SMMEs. It is concerning to note that poor consumer credit scores remain one of the primary reasons cited by banks for rejecting Covid-19 relief funding applications.
“Banks urgently need to develop new credit assessment models centred on the re-payment history of the business itself, rather than focusing on the business owner’s personal credit record, to determine the business’ credit worthiness.”
From now on, the common thread among the businesses surveyed is that funding and digital migration are major priorities, Finfind stated.
“In the wake of 2020, the coming year will likely be a rocky road for most South Africans, but there is still some optimism from entrepreneurs, who courageously continue to build this vital business sector.”