Funding is known to be a critical issue for businesses, but Jedd Harris, the Chief Strategy Officer at Sourcefin, says that South African SMMEs don’t have a funding problem; they have a fit problem.
Sourcefin returned this year for the annual SME Funding Summit. This time, not just as an exhibitor but as a bronze sponsor.
According to Sourcefin, the money to fund SMEs exists, however, the issue is that applications mostly fail because the business and the funding type weren’t built for each other. In this article, we’ll highlight key points that Sourcefin addressed at the 2026 SME Funding Summit.
Why Funding Applications Get Rejected
A declined funding application does not automatically mean your business is not financially strong enough. Sourcefin argues that this is not always the case.
Different funding providers are designed to solve different business needs. Applying to the wrong type of funder can lead to a rejection, even when the business itself is viable.
For example, a business looking to finance a large customer order may not need a long-term business loan. Instead, it may need funding that is specifically designed to finance a transaction. Likewise, a company investing in new equipment or expanding into new markets will require funding that supports long-term growth rather than short-term cash flow.
Understanding the purpose of the funding before submitting an application can improve the chances of finding the right funding partner.
Two Questions Every Business Should Ask
Sourcefin introduced a simple framework to help business owners identify the funding that best suits their needs. It starts with two questions.
1. Are You Funding the Business or a Deal?
The first question is whether the funding is for the business itself or for a specific opportunity.
Funding the business could include:
- Expanding operations.
- Hiring employees.
- Improving cash flow.
- Entering new markets.
“Funding a deal” refers to financing a specific transaction, such as:
Delivering on a purchase order.
- Financing an invoice.
- Purchasing equipment.
- Buying commercial property.
Understanding this distinction helps narrow down the funding options available.
2. Will the Money Be Repaid in Months or Years?
The second question focuses on how long the funding will be tied up.
If the money is expected to return within a few months, such as when an invoice is paid, or a customer settles a contract, short-term funding may be more appropriate.
If the investment will generate returns over several years, such as purchasing machinery or expanding the business, longer-term funding is usually a better fit.
According to Sourcefin, the repayment cycle is more important than the length of the contract itself.
The Four Funding Quadrants
Using these two questions, businesses can identify which of four funding categories best matches their needs.
Patient Capital
This category is suitable for businesses investing in long-term growth.
Examples include:
- Research and development.
- Expanding into new markets.
- Building new capabilities.
Funding options may include venture capital, development finance institution (DFI) loans, grants, incentives and enterprise supplier development (ESD) funding.
Asset Finance
Businesses purchasing assets that will be used over several years fall into this category.
These assets may include:
- Vehicles.
- Manufacturing equipment.
- Machinery.
- Commercial property.
Funding options include instalment sale agreements, leasing and specialist equipment finance.
Working Capital
Working capital funding helps businesses manage day-to-day operations when there is no specific contract being financed.
It can be used to cover:
- Supplier payments.
- Inventory purchases.
- Payroll.
- Short-term cash flow gaps.
Common funding options include revolving credit facilities, bank overdrafts, bridging finance and short-term business loans.
Transaction Finance
Transaction finance is designed for businesses that have already secured work but need funding to fulfil it.
This is particularly relevant for businesses that have won tenders, purchase orders or contracts but require capital to pay suppliers before receiving payment from customers.
Funding products include the following:
- Purchase order funding.
- Invoice discounting.
- Trade finance.
- Import finance.
Sourcefin notes that this is the type of funding the company specialises in, helping businesses unlock opportunities without waiting for customer payments.
Matching the Funding to the Need
One of the key messages from Sourcefin’s presentation was that choosing the right funding product can make the application process more straightforward.
When businesses approach the right type of funder, they are more likely to:
- Meet the funder’s lending criteria.
- Provide the appropriate supporting information.
- Receive a faster funding decision.
Rather than asking, “Where can I get funding?”, Sourcefin encourages business owners to first ask, “What type of funding does this opportunity require?”
Helping SMEs Find Their Funding Fit
To help business owners determine which funding category best suits their needs, Sourcefin has developed a free online Funding Fit diagnostic.
The assessment takes approximately 90 seconds to complete and guides businesses to the funding options that best match their situation. If another funding provider is better suited to their needs, the tool also points them in that direction.
For SMEs navigating South Africa’s funding landscape, understanding the difference between funding products could be the first step towards securing finance that supports sustainable business growth rather than simply obtaining capital.
