Geddes didn’t actually start off as a lender. Believe it or not, our initial business plan was to focus on private equity. But we strayed from our path and ended up exactly where we were meant to be all along. This is how it happened.
We began our PE adventure in 2017 and, after much deliberation, landed on what we felt was our perfect niche – health foods. The plan was to buy small stakes in businesses and give them access to working capital. We wanted to make things easier for business founders.
We quickly learned that buying minority stakes in small businesses can be extremely challenging. Often, more challenging than big businesses. Small business owners tend to be much more emotionally driven. Private equity investors tend to be very spreadsheet driven. You can see where the friction comes in!
At around the same time, we came across an SME that needed a loan and as usual, didn’t fit the banks’ “risk criteria”. They had been in business for 35 years but the bank felt the owner was too old to be taking a mortgage out on his property to support his business. Can you believe it? Well, thanks to the banks, that ended up being our very first SME loan. Spoiler alert: The business recovered, our loan was paid down perfectly and the owner is still very much in good health.
We quickly found that lending to small businesses suited us, and those businesses, far better. Who better to lend to than people who have a real emotional connection with their businesses? We always say that even though it’s a business loan, we are lending to people.
We also came to learn that Southern Africa has an entire sector of businesses in need of funding who are battling with banks that are too focused (we think) on the wrong things. When SMEs apply for loans from banks, the odds are already stacked against them.
Loan processes are long and laborious and tend to divert business owners' attention away from the important day-to-day of the business. The banks either deliver a cookie-cutter funding plan or reject the SME based on its past performance, instead of looking at its future trajectory.
On top of this, banks tend to overcomplicate things and most SMEs do not have the luxury of legal representation to help them navigate these complications. We believe that everybody wins if the T&Cs are clear and fair.
We realised that our mission at Geddes should be to offer businesses finance options that are faster, future-focused and simpler so that SMEs can get the funding they need, to build the future they deserve. It was also clear to us, that we should work with our clients to find the best funding solution for them. Borrowing money is complex, we should be assisting our customers to demystify this and make sure they get the best solution for their needs.
The greatest thing that Brent, Warren and myself bring to the table is our experience. We have all been entrepreneurs in some way or another and know exactly what SMEs require in order to survive. We know first-hand how frustrating it can be sitting across from an old-school banker who simply does not understand what it means to be a business owner. We understand what capital can mean to a business and how one small injection of cash can change the way the future looks.
In our 5 short years of operation, we have been able to assist SMEs with getting off the ground and staying that way. A defining moment for us was when we supported one of our farming clients to survive through and thrive beyond one of the worst droughts the Northern Cape has ever seen. Farms were not able to feed their livestock and, by extension, their workers and families. Our client had been rejected by bank after bank but we saw their potential and helped them navigate a potential financial drought.
This experience, where we were able to save a family business from potential ruin is a constant reminder of why we do what we do at Geddes Capital.
As Geddes has grown, we have added multiple products to our suite of options for our South African SME clients. Each time there is a funding need we haven't been able to solve, we go back to the table to find new and innovative structures that can work. Once tested, we add them to our offering. It is important to me that this ethos is always part of the Geddes culture.
We may not have planned to become SME funders, but we are incredibly happy that it is what we are now. We see the importance of funding the dreams of our clients and that’s why we wake up every day and continue our mission.
Craig, Co-Founder & COO of Geddes Capital