A number of issues have arisen out of this research, which need to be addressed by relevant role players in order to contribute to addressing the research problem at large. This research was an empirical investigation and analysis of the contribution that the determinants of the Financing Framework could have on access to external finance by SMEs in general and in Pietermaritzburg in particular. The findings indicated the appropriateness and positive impact that personal entrepreneurial awareness and management skills could have on access to external finance by SMEs. This research identified a number of determinants which are associated with funding requirements and linked to the type of external finance, and together form the Financing Framework for access to finance by SME start-ups.
6.3.1 Recommendations to SME owner-managers
The research findings provide SME owner-managers with a basic understanding of the key determinants of the success of SME start-ups, as well as information on how their entrepreneurial awareness and management skills could improve their ability to access different sources of external finance. By understanding and utilising the Financing Framework, SME owner-managers would be able to plan their financing needs and choose from among three main sources of external finance.
It is strongly recommended that business owner-managers understand the determinants of business awareness and management skills to improve their ability to access external finance. During the start-up process of the business, the entrepreneur must be aware of the business opportunity, as without an opportunity there is no sustainable business potential. To gain a competitive advantage, differentiation of this business must be highlighted, the business model formulated and the strategy clearly defined. A business plan which weaves all the determinants together must be developed to understand, among other things, the amount of seed capital required and the source from which this capital could be obtained.
To sustain and grow a business and increase the chances of obtaining external finance, the entrepreneur should realise that general management experience is of vital
importance, as well strategic management skills. A lack of technical skills may also contribute to the failure of a start-up business, although this can be resolved through the employment of suitably qualified staff. However, the entrepreneur could still be at a disadvantage if he is dependent on staff, more specifically during the early stages of the business. A lack of understanding of financial management and poor financial management can also contribute to the demise of the business. Similarly, uncontrolled growth, together with poor inventory control, are also major contributors to business failure. Marketing skills are critical to the success of every business, as are contingency management skills, which allow the owner-manager to adapt to ever changing circumstances. Most of all, the entrepreneur must be desirous of growth.
6.3.2 Recommendations to South African government and policy-makers
Although the South African government agencies providing funding to SMEs require financial statements from the loan and grant applicants, which indicates that they understand that financial statements are an important determinant of a start-up business success, not much is being done to develop programmes to increase the broader understanding and knowledge associated with preparing of financial statements. The South African government agencies actively encourage the use of consultants to complete business plans, which further contributes to a lack of understanding of the business by the owner-manager. Thus, it is recommended that more programmes be offered to assist the SME owner-managers to understand the importance of planning and be able to develop their plans.
The South African government (agencies) should also promote SME start-up entrepreneurship training programmes such as business coaching. These programmes should be flexible and offered such to accommodate the owner-managers’ own schedule and pace of learning. This entails working with an experienced coach who has a high level of understanding of small business.
It is also recommended that to get the required funding from finance providers; business owners must ensure that they have the requisite and or fundamental education, training and related experience (business incubation), which can improve start-up business awareness and managerial competency and skills. Public (and private) education
institutions should strengthen entrepreneurial education, and orientate the population to entrepreneurship from an early age when it is easier to inculcate certain skills. To improve the experience of new SME owners, “learning from peers” or government agencies can institute mentorship approach.
The government of South Africa in collaboration with finance providers should consider instituting interest subsidies to SME start-ups based on their potential to succeed, which may make it less burdensome for such businesses, particularly younger ones, to access external finance.
6.3.3 Recommendations to the SME finance providers
The findings have confirmed the relationships between finance providers and the requisite skills of entrepreneurs. Banks should be able to develop mature relationships with start- up SMEs and increase the availability of finance to them. Banks should be able to assess SME finance applications based on the determinants of the Financing Framework. Like commercial banks, private equity finance providers should also emphasize the determinants of the Financing Framework when evaluating SME start-up financing applications.
Also, financial institutions and other fund providers should design special schemes for SME start-ups to cater for their specific financial needs. This is because most SME start- ups will not meet the requirements of the finance providers if they use the conventional system of accessing requests for financial assistance. Developing such schemes will make it attractive for SME start-ups who previously did not meet the requirements of funding providers. Such a system could be designed through dialogue with all the stakeholders such as the Government, fund providers and SME start-ups.