Obtaining funding for new tourism ventures can be challenging, as economies fluctuate, competition is rife and financing tends to be hard to come by, especially from an SME’s perspective.

SMEs agree that the departments and financial institutions that offer financing need to stop working in silos and come together to make finance available for budding businesses. They also need to implement a development scheme and mentor SMEs from the get-go, prior to the application process for funding, as the odds of rejection remain high.

Tourism Update delved deeper into the matter, asking key players and operators what challenges they have faced. 

Rushdi Harper, owner of WOW Cape Town Tours, said the main challenge SMEs and start-ups faced in tourism is drawing up the comprehensive business plan needed to apply for financing. The second challenge is that they have to be properly listed on the Department of Tourism’s database, which is a requirement to be eligible for a funding grant.

Chief Executive of SME Tradelinks, Dr. Salifou Siddo, said the general belief was that funding for SMEs, and tourism SMEs in particular, remained difficult to access. The general perception is that only a limited number of institutions provide financing, and of the handful that do, the complaint is that navigating the bureaucratic hurdles to access financing is daunting enough to discourage even the most optimistic of applicants.

Siddo, however, says this is not the case as there are multiple institutions that offer financing; the issue comes with credibility and managing the bureaucratic hurdles.

He said: “Put another way, the finance is available, the challenge is finding ‘fundable’ entrepreneurs – entrepreneurs that are ‘ready for finance’. And while ‘fundability’ is based on the quality of the applicant’s financial records; and the merit and the viability of the business case, among other things; another very important aspect is character in terms of the perceived honesty, reliability, and trustworthiness of the applicant as determined during the funding due diligence process, or during credit committee deliberations.”

Siddo emphasised the importance of transparency in the way applicants handle business funds, as there is often no clarity around how funds flow from the company’s business accounts to the owner’s personal accounts.

The appropriation of funds is of high importance to a credit committee. “So although the popular view is that it is very difficult for SMEs to access financing to grow their businesses, the reality is that some funding applicants simply lack proper financial management systems and thus fail to meet the risk management requirements of a lender who needs assurance that the borrower will be able to repay the loan,” he concludes.