Unlocking Working Capital: Overcoming Funding Barriers for South African SMEs

Posted by Ponkie Thekiso on 05 November 2025, 15:00 SAST

Following our discussion on the Revenue Trap and cash flow challenges, it’s clear that access to working capital remains a critical hurdle for many South African SMEs striving to survive and grow.

While invoice factoring can help unlock cash tied up in unpaid invoices, many businesses face broader obstacles when seeking funding—especially credit barriers unique to the local context.

Key challenges include:

• Collateral requirements: Many SMEs lack traditional assets banks require to secure loans, limiting access to formal credit.
• Limited credit history: New or informal businesses often do not have sufficient financial records or credit profiles.
• Administrative burdens: Complex application processes, extensive documentation, and slow approvals discourage many entrepreneurs.
• Late payments and economic uncertainty: Prolonged debtor days and fluctuating costs add pressure on already tight cash flows.

Practical ways to overcome these barriers:

• Tap into government support programs: Institutions like SEFA, NEF and IDC offer loans with flexible terms, grants, and business development support tailored to MSMEs.
• Explore fintech and alternative lenders: Digital lenders and merchant cash advance providers often use innovative credit assessments that look beyond collateral, focusing on business performance and invoice quality.
• Leverage digital payment platforms: Accelerating payments with tools like Yoco or SnapScan improves cash inflows and strengthens creditworthiness.
• Build financial literacy and documentation: Maintaining proper records and engaging advisors can improve loan readiness and build trust with funders.
• Network and collaborate: Engaging with business incubators, industry groups, and funding forums can open doors to blended financing and partnerships.

By understanding these challenges and actively leveraging diverse funding channels and support structures, South African SMEs can bridge the working capital gap—turning cash flow constraints into opportunities for sustainable growth.