Palmer says that at present, even the smaller financiers are treading carefully in terms of greenlighting loan applications, making it crucial for small to medium-sized businesses to check their credit records regularly and ensure tax compliance. 

Whilst this may seem like an obvious thing for a business to do, Palmer says they have noticed in their engagements with prospective clients seeking help, that some small businesses are in fact failing to do so. 

The Covid-19 pandemic, protest action in KwaZulu-Natal and Gauteng in 2021 and the recent floods serve as a reminder why businesses need to have cash reserves as a buffer to remain afloat in case of unexpected shocks.

The Paragon CEO says that, for a long time, owner-managed businesses used their company accounts as piggy banks, as opposed to exercising financial discipline and carrying out forecasts. Covid-19 saw businesses without reserves struggling to make it, with some eventually closing down, whereas those that did have that buffers ended up leveraging that advantage and acquiring some of these struggling businesses.

Previously on the OFM Business Hour Palmer said that commercial financiers are becoming more conservative with respect to financing local businesses on the back of Covid-19, a sluggish economy and political instability. 

ALSO READ: #OFMBusinessHour: Financiers looking into life policies and social media as a part of lending requirements

He said not only are lenders reducing their loan to values on transactions, but they are checking entrepreneurs’ life covers, and social media accounts to determine suitability for financing. 

This is in addition to all the normal credit checks, that one would be exposed to when applying for a business-related loan. He says that this is why it takes that much longer to obtain a loan. In a world where cash/liquidity is king, these stringent requirements should not be ignored by any entrepreneur.

OFM