There Is A Small Business Funding Readiness Crisis In South Africa

SMALL BUSINESS FUNDING READINESS CRISIS

According to the SA MSME Access to Finance Report 2025, the number of black-owned, women-owned and youth-led businesses have increased since 2018, and are now driving a much larger share of MSME (Micro, Small and Medium Enterprises) funding applications. Black-owned MSMEs accounted for 83.7% of all funding requests in 2024, a significant increase from 66% in 2018. Likewise, women-led businesses now make up 36.1% of funding applicants, up from 32%, and more than 50% of MSME funding requests are from youth-owned businesses. These gains reflect a positive trend toward a more inclusive and representative small business sector in South Africa.

However, these businesses face huge challenges accessing finance, not the least of which is that many of them are not funding ready. This is a key takeaway from the newly launched SA MSME Access to Finance Report 2025. The report’s data shows that most micro and small businesses lack basic financial recordkeeping systems – a major barrier when seeking capital.

 According to the report’s findings:

• Only 36.8% have formal financial statements
• Just 24.6% of businesses use a proper accounting system
• A staggering 83.4% operate without a formal payroll system

These gaps in financial documentation underscore why so many smaller businesses struggle to secure funding. Financial recordkeeping is paramount when it comes to funding – lenders need to be able to confirm a business’s turnover, track monthly trading activity and validate cashflow projections, amongst other things. While small businesses desperately need capital to grow, they often lack the financial know-how, recordkeeping and compliance required to access it. Without up-to-date books, even viable enterprises are flagged as high-risk by lenders and frequently find themselves shut out of funding opportunities.

Bridging the Funding Readiness Gap Requires Support

Finfind – South Africa’s leading online fund matching platform for small businesses – believes that there is a solution to address this crisis. In a past pilot of a Small Business Funding Readiness Programme, Finfind trained unemployed youth graduates to use a basic financial recordkeeping system and placed them in small businesses to help establish proper financial books and other business compliance. This hands-on support helped participating businesses get on top of their finances, produce financials and position themselves for funding. The 2018 Presidential Jobs Summit initiative created a double benefit – young graduates gained practical work experience and post-pilot placement opportunities, while the MSMEs they assisted became financially-fit and funding-ready.

The SA MSME Access to Finance Report revealed that formal micro enterprises with turnovers of less than R1 million a year are the most underserved by funders, yet they account for over 80% of the jobs created by MSMEs and make up more than 85% of the funding need. To assist these businesses in accessing funding, the report recommends enhanced support services, including financial recordkeeping training and funding readiness assistance.

“When it comes to startups and micro entities, sales will bring in the business, but only sound financial recordkeeping will keep them in business and ensure growth”, says Finfind CEO Darlene Menzies. “If we are serious about job creation, we must invest all our efforts in supporting these businesses that are creating the jobs.”

She emphasises that ensuring businesses have the support they need to become finance-fit and funding ready is as critical as funders ensuring they have the right products to address the real funding demand, i.e. funding for startups and micro businesses.  

It is going to take a concerted effort and collaborative action from government, banks, corporate ESD programmes and business service providers to implement pragmatic solutions like a Funding Readiness Voucher Programme for example, but it is imperative that action is taken. Entrepreneurs are resilient and resourceful, and they want to be on top of their business finances; with practical support and access to the right tools, many more of them will qualify for funding, be positioned for growth and be able to create the thousands of jobs needed in the country.

For a copy of the Report, visit https://accesstofinancereport.co.za/

Partners and Sponsors:

The SA MSME Access to Finance Report 2025 was made possible through the collaboration and support of key partners committed to strengthening South Africa’s small business ecosystem:

• Lead Sponsor: African Bank
• Sponsors: SAB Foundation, Experian South Africa, National Financial Advocacy
• Public Sector Partner: Department of Small Business Development
• Data Analysis Partners: Stellenbosch University’s Bureau of Economic Research (BER), Experian South Africa
• Global Partner: World Bank IFC

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