A tool to help SMEs assess their funding readiness

There is no doubt that funders themselves need to innovate to better reach underserved high-potential businesses, including the many SMEs that fall into the 'missing middle' – startups and early-stage or developmental SMEs that may be too risky for banks but too small or not a suitable fit for VCs. Assessing funding readiness gives businesses a clear view of where they stand on the path to securing capital and is a vital step in helping this important sector to thrive.

As a leading SME and Venture Fund Manager, Edge Growth specialises in developing small businesses, with access to finance being one of the key constraints they address. As such, Edge Growth has created an easy-to-use Funding Readiness Assessment tool to help small businesses understand where they are positioned in their journey to secure funding.

Of course, before taking steps to become more funder-ready, it’s essential for SMEs to evaluate key factors about their business that will ultimately determine whether a business is fundable or not. They should consider the problem they are solving through their product or service and whether customers will pay for it, whether the business is innovative and aligned with market trends that attract funders, and whether they are prepared to embrace the accountability that funding entails.

The tool’s questions cover key areas such as business fundamentals, financial management, customers and growth, as well as people and operational systems, with the scoring and interpretation classifying businesses into four readiness levels. Upon completing the assessment, those found not to be ready yet can focus on the basics, including adequate registration, tax compliance, and record-keeping, while those who are partly there can strengthen financial tracking, formalise documents, and explore small grants or starter loans.

Businesses that are almost ready will most likely need to refine their financials and craft a compelling story for funders, while those fully ready are well positioned to prepare a pitch deck and apply for relevant funding. Small businesses at this stage are ideally suited to apply for funding from Edge Growth. Edge Growth provides support to early-stage, post-revenue South African businesses with high growth potential, prioritising SMEs in the financial services, industrial, education, healthcare, green economy, digital inclusion, and B2B sectors that are at least 51% Black-owned and locally based.

Edge Growth’s Funding Readiness Assessment also provides SMEs with a clear overview of the types of funding options available and unpacks which types of funding best suit different business stages and needs.

To date, Edge Growth has supported over 1,000 SMEs, helping create more than 13,000 jobs and positively impacting over 100,000 livelihoods. With a total of over R1.5bn in funding deployed and total assets of R2.5bn under management, Edge Growth has engaged with over 150 corporate clients – partnerships that continue to fuel small business success.

For more information, go to www.edgegrowth.com or to access the Funding Readiness Assessment, go to https://biz-file.com/f/2509/Funding-Readiness-Assessment-Form.pdf.

*Reference: https://www.ifc.org/en/insights-reports/2019/msme-opportunity-south-africa