The National Development Plan (NDP) envisions that by 2030, 90% of South Africa’s 11 million needed jobs will be created through small to medium enterprises (SMEs). Recently, the government launched a new Spaza Shop Support Fund, adding to the many funding options available in South Africa.
However, 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. Capable entrepreneurs with promising businesses are often held back simply because their credit profile doesn’t reflect their potential. 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.
Formalise Your Business
Approximately 1.79 million South African SMEs currently operate informally. Failing to formally register your business not only limits access to funding but also prevents you from building a credible financial track record. The newly launched Spaza Shop Support Fund, for example, restricts funding for unregistered enterprises to below R80 000. To access better opportunities, it is critical to register your business with the Companies and Intellectual Property Commission (CIPC), open a business bank account, and ensure full compliance with the South African Revenue Service (Sars). Additionally, keep your personal and business finances separate. This practice not only simplifies tracking performance but also establishes your business as a standalone entity in the eyes of credit providers.
Build a consistent financial record
Financiers evaluate businesses based on documented financial performance. At a minimum, this requires up-to-date management accounts, annual financial statements, and a clear record of tax compliance. These documents demonstrate that your business generates income, manages expenses effectively, and has the capacity to take on and repay debt. If you lack in-house expertise, consider working with a bookkeeper or accountant. Reliable financial records not only help you manage your business more effectively but also significantly improve your funding prospects.
Maintain a positive payment history
Paying creditors and service providers on time is one of the most effective ways to build a strong credit profile. A consistent payment history signals to lenders that your business is dependable and financially responsible. Whenever possible, work with suppliers that report to commercial credit bureaus, as even small trade credit accounts can contribute to your credit score if managed well. The same principle applies to business credit cards, fuel accounts, or other short-term facilities taken in the business’s name.
Stop relying on your personal credit
Many SME owners initially rely on their personal credit history when applying for funding, especially in the early stages. While this may be necessary at first, it’s important to transition toward using credit in the business’s name. Building a separate business credit record protects your personal credit in the long run and demonstrates to lenders that your business is financially independent. From a lender’s perspective, a business standing on its own financial footing appears more sustainable and investable.
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 provides insight into what lenders see, including past defaults, judgments, payment trends, and your overall risk profile. Regularly check your report and promptly resolve any issues or disputes. Understanding your credit standing also enables you to plan funding applications more strategically.
Be Proactive, Not Reactive
Too often, businesses approach lenders only when they face financial pressure. However, funding decisions are rarely instant, and urgent applications can raise red flags. To avoid being caught in a difficult situation, start building relationships with funders as early as possible. Take the time to understand their requirements, seek guidance on strengthening your application, and maintain open communication. Being proactive will position you more favorably when the time comes to apply for funding.
Jeremy Lang is the managing director at Business Partners Limited
BUSINESS REPORT