Financing ict smmes at different stages of the business life cycle

Authors Details :
Luyolo Mahlangabeza

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Small, medium and micro enterprises (SMMEs) represent a vital element in our economy in terms of addressing unemployment and the gross domestic product (GDP) of our country. Improving the success rate of SMMEs would save a lot of financial resources, thus understanding the financing options that complement success at different phases of the business is very important. This research sought to examine the extent to which the financing options chosen by entrepreneurs will have an impact on business success. The investigators adopted the progression of the ventures along the business life cycle stages as a benchmark for assessing success. The study focused primarily on SMMEs in the Eastern Cape Information Communication Technologies (ICT) sector. Data was obtained using an online survey which reached 50 small business owners/ business representative within the ICT sector in the Eastern Cape Province. The research study showed the role that internal financing options, such as personal savings, family, relatives and friends' financing, retained earnings, sale of existing assets and cutting down stock levels, play in the achievement of ICT SMME success. Moreover, examined external financing options such as Broad-Based Black Economic empowerment (B-BBEE) financing, bank loans, equity financing, government grants, trade credit, to SMME success. Key results revealed that the financial support of B-BBEE and personal savings have played a key role in the success of ICT SMMEs throughout the business life cycle phases. This occurs after an ICT SMME has advanced successfully over the start-up stage and aims for success in the development phase. The finding revealed that for these SMMEs to attain success at the development stage, they should finance their business investment projects utilising credit trade, bank loans, families, relatives and friends. The abovementioned financing options are only substantially linked to good advancement from the development phase onto the expansion phase. Also, suggestions have been made to the ICT SMME management to include B-BBEE finance, personal savings, bank loans, families, relatives and friends and trade credit as suitable funding choices for the ICT SMME's life cycle