Gone are the days when crippling fixed monthly loan repayments were expected from us even when our income was inconsistent or unpredictable.
One of the scariest things about operating a business is taking on debt when one is uncertain about future earnings, especially in tough times. With rising interest rates, business loan repayments that were once affordable can quickly start threatening cash flow.
“Data shows that the difficulties South African businesses experience when trying to access flexible credit quickly are impacting their ability to survive and grow,” says Darren Segal, Head of Standard Bank’s Moonshots.
He says this is especially true in tough times when it is crucial for businesses to have the capital to take advantage of opportunity.
“With this challenge in mind, we set out to launch a digital, fixed-cost, pay-as-you-earn loan facility – an ambitious undertaking for a business loan,” explains Segal.
BizFlex was built using intelligence gathered from face-to-face client interviews, an extensive online banking survey and direct business banker feedback. From these exercises, four pain points emerged:
- Most business loan offerings in the market had hidden or unclear costs and costing structures.
- Onerous in-branch approval and signing processes added friction, taking business operators away from running their businesses.
- Loans were slow to be approved and took too long to access, with the result that opportunities slipped by.
- Inflexible repayment structures made it challenging to honour loans.
Today, BizFlex is a paperless loan application, disbursement and repayment system that businesses access through their online banking platform.
“Within minutes, BizFlex quotes a single fixed cost, with repayments chosen by the client as a percentage of their revenue earned,” says Keldon Moodley, Head of BizFlex at Moonshots.
Offering clients a fixed rand cost for their loan is a unique feature that helps entrepreneurs know exactly how much their loan will cost them. It also provides the confidence that this amount will never change, regardless of how long it takes to repay the loan or how often the prime lending rate increases.
Each month BizFlex automatically notifies qualifying clients of the loan amounts available to their businesses. Clients can then choose to take up the bank’s offer when the need arises, setting up the loan on their online banking profile themselves. Once all directors have digitally signed, “within minutes the money is in their current account,” says Moodley.
Clients can select any amount from R40 000 to R5 million, depending on the limit offered. While most loans are preapproved, some may require a credit assessment. Clients also choose the percentage of their revenue that they are comfortable committing towards repayments.
For example, a client borrows R100 000, agreeing to repay at 5% of revenue. Based on existing revenue data, BizFlex then estimates a repayment term of six months, charging the client a fixed R10 000 for this loan. In this example, from the get-go the client knows they will only ever pay a cost of R10 000 on the R100 000 borrowed. Moodley adds that since there are also no additional costs or penalties for taking longer to repay the loan, “even if the client takes more than the six months initially estimated, they won’t pay a cent more”.
The significance of a repayment calculation based on daily revenue can’t be overemphasised.
Let’s take the example further. If, on the first day of the loan period, a client banks R10 000, BizFlex will allocate 5% of this (R500) as a loan repayment. In other words, repayments are made on days when revenue is earned. This removes the worry and hassle as businesses do not need to set cash aside for monthly loan repayments.
“Many business owners report that BizFlex provides a sense of calm, removing the fear of missing repayments at month-end, since deductions are made as and when the business earns,” adds Moodley.
As clients pay down loans, but need more capital, BizFlex offers a loan top-up feature, allowing clients to access more capital with a new loan.
“To enable all industries to access BizFlex, Standard Bank has deliberately built the solution on the back of revenue moving into the client’s business banking account – not just point-of-sale transactions,” explains Moodley.
Clients to date include the full range of retail businesses, as well as the automotive and medical sectors, financial services, architects, construction firms, lawyers and real estate and security companies, to name a few.
Between July 2019, when BizFlex was launched, and June 2022, BizFlex made more than R3 billion available to about 10 000 small and medium-sized businesses across South Africa.
“Although BizFlex is currently only available to qualifying Standard Bank business clients in South Africa, we are considering rolling BizFlex out to other African markets,” adds Segal.
Standard Bank is also looking at opportunities to partner with other non-competing financial services organisations globally to help them launch BizFlex to their clients.
Through the provision of digitally accessible, flexible capital, BizFlex is taking Standard Bank’s tradition of being the bank that supported South Africa’s greatest business ideas to a new generation of South African entrepreneurs.