And yet, according to a report by the Small Enterprise Development Agency (SEDA), only 12% of South African SMEs have access to formal funding channels. This limited access to finance remains one of the country’s leading causes of business failure.
Author: Jeremy Lang, managing director at Business Partners Limited
Capable entrepreneurs with promising businesses are often held back simply because their credit profile doesn’t do them justice. So, whether you're just starting or have been operating for years, here are six ways to strengthen your business credit profile and improve your chances of securing funding.
1. Formalise your business
Around 1.79 million South African SMEs are currently operating informally. Failing to formally register your business not only limits access to funding; it also prevents you from building a credible financial track record. The newly launched Spaza Shop Support Fund illustrates that formalising your business is crucial, as it restricts funding for unregistered enterprises to below R80,000.
If you haven’t already, it is critical to register your business with the Companies and Intellectual Property Commission (CIPC), open a business bank account, and ensure you are fully compliant with SARS.
Don’t forget to keep your personal and business finances separate. Not only does this make it easier to track performance, but it also helps establish your business as a standalone entity in the eyes of credit providers.
2. Build a consistent financial record
Financiers assess businesses based on documented financial performance. At a minimum, this includes up-to-date management accounts, annual financial statements, and a clear record of tax compliance. These documents demonstrate that your business is generating income, managing expenses, and can afford to take on and repay debt.
If you don’t have the expertise in-house, work with a bookkeeper or accountant. Reliable financial records will help you manage the business more effectively while improving your funding prospects.
3. Maintain a positive payment history
Paying creditors and service providers on time is one of the most important ways to build a strong credit profile. A consistent payment history signals to lenders that your business is dependable and financially responsible.
Where possible, work with suppliers that report to commercial credit bureaus. Even small trade credit accounts can contribute to your credit score if managed well. The same applies to business credit cards, fuel accounts or other short-term facilities taken in the business’s name.
4. Stop relying on your personal credit
Many SME owners rely heavily on their personal credit history when applying for funding, especially in the early stages. While this might be necessary at first, it’s important to transition toward using credit in the business’s name. Doing so allows you to build a separate credit record and protect your personal credit in the long run.
From a lender’s perspective, a business standing on its own financial footing appears more sustainable and investable.
5. Know your business credit score
Just as individuals can request their personal credit report, businesses can obtain a commercial credit report from agencies like TransUnion or Experian. Reviewing your report gives you visibility into what lenders see, including past defaults, judgments, payment trends and your overall risk profile.
Check your report regularly and resolve any issues or disputes promptly. Knowing your credit standing also helps you plan funding applications more strategically.
6. Be proactive, not reactive
Too often, businesses only approach lenders when they are under financial pressure. But funding decisions are rarely instant, and urgent applications often raise red flags.
To avoid being caught between a rock and a hard place, it’s advisable to begin building relationships with funders as early as possible. Take the time to understand their requirements, ask for guidance on strengthening your application, and keep communication lines open. Being proactive will put you in a stronger position when the time comes to apply for funding.
