According to Forbes, Standard Bank is “the largest lender in Africa”, as the banking group launched the game changing forex trading app in 2017 – Shyft. This position of largest lender is backed by 157 years of lending money to business owners and individuals.
Global consensus is that the purpose of business is profit and sustainable growth, as much as it is solving problems or providing desires for customers. This is the essence of entrepreneurship, all funded by an investor. In Africa, the largest formal investors in small businesses after banks; therein Standard Bank is the standard of banking.
Okay, moving forward!
In South Africa, as is in all their markets, when looking for a business loan, if you meet the Standard Bank “requirements and standards” for a business loan, then know that you can get capital from any institution in anywhere. Standard Bank has a meticulous, yet development centric screening process that is worth considering going through when looking for capital for a business venture, no matter the size.
When a business owner is looking for a bank loan, most tend to select banks that are convenient as opposed to those with detailed integrity checks, especially regarding financial records and planning.
In business, financial planning and financial records are very important to investors; hence keep them, and pay attention to them, because banks, just like any other investor, pays attention to them. South Africa has a good score in Africa on the Ease of Doing Business Index, especially on Getting Credit. Hence it is very relatively easy to get a loan in South Africa, but, for business, put yourself in the shoes of an investor; would you give your funds easily without assurance that the business is not only viable, but those running it know all things possible about managing money?
Enter Standard Bank.
Let’s review Standard Bank, not only because of their age and market leadership as largest bank lender in Africa, but also considering futurist record-breaking moves like being the first bank in Africa to go onto the Amazon Web Services (AWS), global cloud business services by Amazon.com, and also frontier products like Shyft. Despite being traditional, they have secured their presence in tomorrow’s e-commerce world, giving them ability for unfathomable integration, merger, and diversification of banking and investment services.
Integrity over Convenience
According to global ratings, Standard Bank is the largest bank in South Africa by assets, and most of this is because of their placing more value in integrity more than convenience. Whilst many banks are very convenient, able to open an account in minutes for some banks, Standard Bank is solid in their processes and due diligence.
According to a Consumer Satisfaction Index of 2019, of the big five banks, Standard Bank is third in customer satisfaction. Standard Bank has 8.1 million (2019) customers, in third place. The common denominator of the top recruiting banks ahead of Standard Bank is convenience, as they are the easiest banks to open an account with. Standard Bank, however is pro-business development more than them all.
Whilst others are wonderful in their ways, and have so many advantages of banking with them; looking at industry ratings and market performance from a business banking perspective, especially on the small business front, Standard Bank stands out on recruitment of quality business related customers.
Where others are more convenient than Standard Bank, from a strategy perspective, one would ask, is business banking about convenience or integrity? The business owner must produce and provide convenience for their customers, but must keep their finances with institutions with integrity and who not only value it, but practice it on behalf of depositors toward borrowers. It makes sense for me to prefer keeping my money with someone that does not lend it easily, because I am assured of its safety. It also makes sense for me, if I am serious about business, to borrow from someone who does not easily give money just because I want it, but is patient enough to walk with me.
So, if the market leaders of banking are about just 100 thousand to 3 million more customers to, and still have Standard Bank close by in the customer recruitment race without amplifying convenience but integrity, then it means there is something Standard Bank is doing right that the South African is loving.
Financial Records, Business Plans and the Bank Loan
There are five types of investors globally – Banks as Investors, Angel Investors, Peer-to-peer lenders, Venture capitalists, and Customers as Investors; in this article, we will look at banks, zeroing in on Standard Bank, and what exactly do they want to see in your financial records, because it is all about the books of accounts at the end of the day.
Before someone invests their money, they want to know what they are going to get from the investment, when, and how. All this can be answered from the day you conceive the idea, develop it, start the business, and grow it. It is important to note that people and institutions to whom you are seeking investment from are not in need of your venture, rather you need them, hence their money is occupied already, whether sitting in a bank, under the pillow, or in their pocket. No one owes your investment, and knowing this helps in presenting self and the venture in a way to “convince them” to invest. In order to get funding, you need to present a good Business Plan. There is much that can be said about creating business plans, yet our focus here is one part, the finance part, wherein you show how you behave with money.
Enter Standard Bank BizConnect. BizConnect is a “business guidance academy” for the lack of a better description of it. BizConnect is a step by step guide for an entrepreneur that helps from the personality and character required for a business owner, right through funding the business, planning, growing it, markets and marketing, human capital management, and all things investment. BizConnect has all things one would need to know, especially those that have not been to business school.
In essence, BizConnect is an MBA simplified, for example, the Spaza business owner, desiring to grow his business to Shoprite or Pick N Pay levels. The key element is their Business Planning template, and all knowledge surrounding this.
Through their BizConnect portal, Standard Bank gives a template with brief explanation of what comprises a business plan, which includes the Executive Summary, Company Description, the Opportunity, Industry and Market, the Business Strategy, Management and Operations Summary, the Marketing Plan, and lastly the Financial Plan.
Standard Bank says “this is a very important part of your business plan and requires thorough research and thought. How much money are you going to need to get started and why? If you want to include any useful graphs or detailed calculations, add it to the appendix and refer readers to it from this section. What is key in the Financial Plan of the Business Plan is a Balance Sheet, a 12-month Cash Flow projection, Start-Up Expense Calculations, Profit and Loss Projections, and a Break-even Analysis”.
Understanding the bank from the business planning perspective is very important, as it gives the bank an insight into your behaviour with money, and a leadership of the enterprise. In most cases, capital from these banks are used to introduce a new product, expand operations, or upgrade equipment and supplies. Some small businesses seek bank loans to help with start-up costs. In this case, businesses have to provide collateral, such as a home equity, and as much start-up cash as possible.
Banks look at the Balance Sheet assessing the way you manage cash, assets, and debt. The bank uses a few financial analysis ratios such as the Asset Ratio that helps them understand how you use assets to grow or shrink the business. Whatsoever the total value of the balance sheet, they can gauge your behaviour especially if they look into the future projections you stated, and simulate a future balance sheet to compare. Make sure you are sure of your business and the person that did your financial plan has been modest in projections yet making the business viable. The other ratio they use to analyse your financials is the Gearing Ratio that checks how much your debt is against working capital to use in the business, so as to know if you are able to pay back the amount you borrow.
You have to prove that you are financially responsible, and it is recommended that for best results, start with a bank where you have an existing business relationship. You should also research loans guaranteed by the Small Business by Government, Non-Profit Companies, and related agencies.
The Integrity Checks
For its customers, Standard Bank says the “information we need from you includes a Business plan, detailing the nature of your business, product offering, market environment and current management skills, Cash flow forecast, Sales and purchases budgets, Projected income and expenditure statement, Financial statements of the business, Personal statement of assets and liabilities for all partners, members or directors, Credit bureau checks for the business and all partners, Amount and source of the owner’s contribution or stake in the business, What the money’s intended for (e.g. capital expenditure or working capital), Details of proposed or offered collateral”, all this being part of the package you present as the business plan and application for business loan.
Standard Bank is open to those that do not bank with them, and says “what we need if you bank with someone else includes Financial statements of the business, Three months' bank statements, Facilities letter from your bank, Details of collateral held by your bankers”, over and above that which is required for its customers.
Now, all this may look like a mouthful, but it is basically intended to be an integrity check. Being a bank that protects its depositors’ reputation as much as it protects its name, providing loans with traditional ways of conduct help the business owner to at least put systems in place if none exist. So, by the time one gets a loan from Standard Bank, they would have gone through a mini-MBA and are ready to be responsible about finances by keeping records and business intelligence.
These integrity checks, documents required, reports, etc. can all be constructed by the business owner, with guidance from the BizConnect portal, that includes videos for those lazy to read.
The Future of Banking
The future of banking is simply that, your business bank must bring the world to your local, giving you access to international markets, yet still remain your local bank with their relevant products.
Standard Bank has several products for business development such as Business Revolving credit plan, Fixed term business loan, Agricultural production loan, Corporate credit card, Fixed repayments business loan, Bonds and guarantees, BluMobi, Commercial card: Corporate charge card, Banker’s acceptance, Recurring payments, Travel Lodge card, and Business Overdraft. The future of banking is centred on financial intelligence of the business owner, financial innovation and integrity of the bank and other financial services providers. PwC analysed the big four banks, and wrote an industry report, that highlighted certain game changing business development moves by Standard Bank.
PwC, in the banking industry report said "in business and corporate banking Integrate the comprehensive suite of banking solutions to service clients’ entire wallet. One of the core advantages that the four universal banks have over challengers is their ability to meet clients’ full set of business and corporate banking needs. However, to maintain this advantage, banks will need to develop integrated solutions that meet the changing, complex needs of existing and future customers. For example, integration of cross-border networks, debt financing ability, and transaction processing capabilities can present themselves as an all-in-one solution to local businesses that rely on export markets (e.g. farmers). This will require banks to ‘unfederate’ themselves and break away from product silos, to get a holistic view of their clients. In so doing, banks can improve their client value propositions, increase their share of wallet and drive customer retention.
Increased collaboration between banks to offer more comprehensive products to varied markets is another example of integration aimed at delivering customer value. The formal partnership between the Industrial and Commercial Bank of China (ICBC) and Standard Bank serves as a good example of this collaboration. By combining their expertise of the Asian and African markets respectively they have been able to provide customers with better commercial banking solutions".
Another game changer initiative by Standard Bank is the Union Pay. UnionPay, also known as China UnionPay or by its abbreviation, CUP or UPI internationally, is a Chinese financial services corporation headquartered in Shanghai, China. It provides bank card services and a major card scheme in mainland China. Engineering News reported that, for South African business travellers to China, UnionPay cards issued in South Africa by Standard Bank will bring new levels of convenience. In future, payments and transactions will take place through swiping of cards at merchants and at any ATM across the country. The problems associated with carrying cash for all payments will, therefore, become a thing of the past.
A wholistic approach to business banking by business owners, especially small businesses, is to engage with a bank that is strict with money, yet patient in business development; this is at the core of Standard Bank, as they growing in being the standard of banking.
The Author: Bakani Ngulani is the founding director of BN Business Solutions, an accounting firm dedicated to serving Small and Medium Enterprises in South Africa. Ngulani has vast experience in accounting, taxation, consultancy and audit function of companies across various categories, including retail, mining, manufacturing, textile, consultancy and non-profit organisations.
Sources: Forbes, Standard Bank, Investopedia, SAVCA
