How Your Credit Score Can Boost Small Business Growth in South Africa

For many South African Small, Micro, and Medium-sized Enterprise (SMME) owners, securing business funding is essential for growth. Yet, one common barrier often stands in the way: a lack of formal banking history. This challenge has left many thriving businesses denied critical funding. Fortunately, the lending industry is evolving to bridge this gap.

Why Your Credit Score Matters for Business Funding

As Garth Rossiter, Chief Risk Officer at Lula, notes, “It is vital that SMMEs have access to reliable and responsible lenders and are able to make use of credit in a responsible manner to scale their enterprises.” Given that SMMEs contribute about 40% of South Africa’s GDP, supporting this sector is crucial for national economic growth.

A key factor in qualifying for business funding is often the personal credit score of the business owner. Lenders use this score to assess financial health and determine funding eligibility. Monitoring personal credit scores and seeking lenders committed to fairness and transparency—like Lula and members of the South African SMME Finance Association (SASFA)—can improve your chances of securing funding.

New Approaches to Credit Scoring

Traditional credit assessment methods have often overlooked South African SMMEs without formal credit histories. However, this is changing. Mladen Č̌olić, Head of FinTech at TransUnion Africa, explains, “We use alternative data, like mobile device information, to calculate credit scores for individuals without traditional payment profiles.”

This approach benefits entrepreneurs lacking formal banking access. Lenders now consider factors such as:

• Industry and geography
• Mobile usage and expenditure
• Business and personal credit scores

This holistic view helps lenders make informed decisions, unlocking funding opportunities for resilient SMMEs driving South Africa’s economy.

How to Improve Your Credit Score

SMME owners seeking funding should actively manage their credit health. Key steps include:

• Requesting your credit score from bureaus like TransUnion (you’re entitled to one free report annually).
• Paying bills on time to maintain a positive payment history.
• Avoiding excessive debt to reduce financial strain.
• Keeping credit utilisation low to reflect responsible credit management.
• Monitoring credit reports regularly to catch errors or potential fraud.

The Bigger Picture: Economic Growth Through SMMEs

Access to funding transforms SMMEs, driving innovation, investment, and job creation. As Rossiter emphasizes, “By considering more than just traditional credit attributes, we’re opening possibilities for SMMEs to contribute to South Africa’s economy more powerfully.”

With evolving lending practices, small businesses can now access the resources they need to thrive. This shift promises a more inclusive and dynamic economic future for South Africa.

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