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South Africa has plunged into a recession for the first time since 2009 after it contracted for a second straight quarter as all bar two industries (agriculture and mining) shrank. With policies generally aimed at economic growth, recessions are rare events. This latest recession reflects what many business owners have been saying since the start of 2017: demand is down, and business conditions are difficult.

Economic growth depends on investment, which in turn relies on confidence and positive expectations of the country’s future. South Africa’s recent credit risk downgrades – together with President Jacob Zuma’s dramatic survival of August’s no-confidence motion in Parliament – have made the country a less attractive investment destination. However, investment is exactly what we need right now to boost demand in the economy.

Effects on business

For most businesses, an economic downturn usually impacts trading activity first, which then affects sales figures and revenue. This decline in revenue will further impact on the financial position of the business in several ways, including profitability and cash flow. In a tragic example, Stuttafords, once called ‘the Harrods of South Africa,’ shut its doors on 1 August, marking the first casualty in the country’s consumer spending slowdown and the largest corporate failure in a post-Nene South Africa.

“One of the biggest mistakes businesses can make at the moment is to fail to get a firm grip on their finances,” says Michael Barr, Chairman of Cullinan Financial Services (CFS), a boutique financial lending firm. “Now is the time to make sure your financial records are up-to-date so that you know exactly where your business stands financially.”

Business finance during a recession

While business owners need to keep their eyes on the future to grow their businesses, taking on a new loan to add physical floor space, increase inventory, or otherwise add to the business should only be considered with the associated risks and rewards in mind.

“In challenging times such as these you need a partner that can work with you to make smart decisions,” says Barr. “It’s a marathon, not a sprint, and the focus should be on long-term relationships – not quick deals. You need to come out of this thriving, not merely surviving.”

Businesses seeking trade finance, bridging loans and property finance in this climate should partner with a firm that can not only adapt creatively to changing financial needs but is willing to walk this road with them. “It’s about having an entrepreneurial outlook,” says Barr. “A good partner in an economic downturn is someone who is constantly anticipating change in order to embrace it.”

As a division of Cullinan Holdings, CFS is uniquely positioned to be more flexible than other financial institutions and banks and can approve applications in as little as 48 hours. “There’s no red tape,” says Barr, who adds that dealing directly with a publicly listed company means you can take comfort in knowing that strict standards, values, and principles are adhered to at all times.

“It is the culture of our business to deal with our customers transparently, efficiently and fairly at all times. We are always available to assist in resolving a problem within reason, which is what sets us apart. Our goal is your peace of mind, especially in these trying times.”

Cullinan Financial Services offers tailor-made financial solutions including term loans, property finance, bridging loans and trade finance for a variety of marketplaces at highly competitive rates. Apply now.