The OECD‘s latest South Africa SME financing country note identifies several barriers alongside the estimated R350 billion financing gap, including informality, limited credit information and finance readiness. Despite the number of MSME funders growing from 148 to more than 300 between 2018 and 2025, part of the disconnect lies in how risk is understood and shared.
A small supplier may have a genuine corporate opportunity but need to pay suppliers and employees weeks before receiving payment. Its funding requirement is shaped partly by the customer’s commercial terms, which means procurement decisions and payment practices deserve a place in the funding conversation.
A corporate can influence a supplier’s financing needs through contract certainty, realistic delivery requirements and reliable payment. For black-owned businesses with limited reserves, those conditions matter enormously. We should examine how the business environment creates the need for capital, alongside the entrepreneur’s ability to access it.
When growth becomes a warning sign
Funding readiness is about making the business understandable and its performance reasonably predictable. Every business faces uncertainty, and what matters is whether the entrepreneur understands the assumptions behind the plan, can recognise when something changes and has the discipline to respond.
A business becomes more credible when its owner can explain both the opportunity and the conditions under which it will work. This requires clarity on customers, margins, cash flow, delivery capacity and the purpose of the funding, along with a regular management rhythm of reviewing performance and following through on decisions.
Growth that the entrepreneur cannot fully explain is one warning sign, particularly when turnover is increasing without corresponding improvements in margins or cash flow. Every new contract may require more borrowing and intervention from the founder, while customer concentration increases and working capital becomes stretched. A business can become larger while becoming more fragile, which is why it is important to look beyond the headline growth figure and examine the quality of that growth.
Recurring problems that are treated as separate emergencies can also indicate that a business is not ready for funding. Repeated late invoicing or unexpected costs suggest a pattern that deserves attention, particularly when the owner becomes the point through which every decision must pass. Funding readiness includes recognising what the business keeps repeating and taking responsibility for changing it.
The danger of funding the wrong problem
Before approaching a funder, entrepreneurs should identify the specific constraint preventing the business from creating more value. A manufacturer may believe it needs another machine, but the real constraint could be unreliable production planning, weak demand or slow customer payments. Each would lead to a different decision.
The entrepreneur should explain how the money changes the business’s economics: what additional income, cost saving, capacity or stability it will create, and when. They should also examine what must be true for the plan to succeed, including whether customers will place the expected orders and whether there is enough working capital while the investment takes effect.
There is a danger in taking on funding too early, although we should be precise about what “too early” means. An early-stage business may be ready for a small amount of capital to test demand, while an established business may be poorly prepared for a large expansion loan. Age and turnover alone tell us very little about that distinction.
Taking on funding too early can put pressure on a business that isn’t equipped to manage it. However, there are situations where capital is needed to build capability, perhaps to buy equipment or bring in expertise. With clear milestones and oversight, the business can develop that capability as the investment takes effect.
What happens when the support ends?
The OECD’s finding that around 80% of MSMEs do not use non-financial enterprise development support gives providers reason to examine the relevance and practical value of their programmes.
Support should leave capability behind, and one useful test is what happens when the programme ends, the coach steps back or the founder is unavailable. Do the financial reviews continue? Does the team know what to do? Are problems identified and addressed without someone arriving to rescue the situation? That is where we see whether learning has become embedded in the business.
At GROW Impact, coaching helps entrepreneurs apply tools, make decisions and establish habits that build reliability. Corporate sponsors also have a role in connecting that capability with real commercial opportunities.
The value of support should become visible in what the business can sustain for itself. That is central to building independent, profitable and enduring black-owned businesses, with funding readiness giving the entrepreneur greater clarity and control over the decision they are about to make.
Ultimately, the useful question is whether this business is ready for this amount of funding, on these terms, for this purpose.
By Keegan Moodley, CEO of GROW Impact