The hype around digital transformation is in the past – even the most conservative businesses recognise the potential of technology to reshape their operations.
However, for many South African companies, cost remains a barrier to change.
If your business is looking for digital transformation funding, we can help. Yalu provides unsecured business loans of up to R6 million, helping mid-sized businesses fund technology upgrades quickly and efficiently.
Why investing in technology is critical
The rapid technological advances taking place globally make it critical for businesses to invest in technology today.
Technology continues to transform the way businesses communicate with clients, streamlines business processes, and helps enterprises stay competitive. By investing in technology, businesses stay relevant and build their digital resilience.
Companies that align investing in technology with their overall business strategy can keep pace with the technological trends that will continue to shape how business is done. Those that don’t will fail – or pay an expensive and complex long-game of catchup.
Fortunately, with access to Yalu’s unsecured loans, businesses can implement digital solutions without waiting months for approval.
Common technology investments for mid-sized businesses
The range of technological investments is vast, but these categories are common for mid-sized businesses:
- Enterprise Resource Planning (ERP) systems
- cloud services and data management
- cybersecurity solutions
- automation and AI-enabled tools.
Financing options for technology investments
Several financing options are available to businesses seeking to invest in technology.
Business loans for IT upgrades
Traditional business loans for IT upgrades can be obtained from various lenders. Capital is provided specifically for technology investments, such as hardware, software or cloud services.
Yalu helps established businesses secure the best digital transformation funding in South Africa, with:
- loans from R50,000 to R6 million
- no requirement for security
- offers sourced from a network of trusted providers.
Leasing hardware and software
By leasing hardware and software, the initial capital investment is removed. It gives businesses a predictable monthly payment, preserves cash flow and ensures regular upgrades to the latest hardware and software.
However, it can create a dependency on a leasing company, risks potentially higher costs over time and precludes long-term ownership of technology.
Government grants or tax incentives
The Technology Innovation Agency (TIA) offers various funding instruments to support the development of technologies and innovations. Funding is based on the amount required for technology development, the stage of development and whether the applicant’s funding request aligns with the purpose of the TIA.
The government offers a research and development (R&D) tax incentive for businesses of all sizes in all sectors in South Africa in order to promote private sector R&D investment. The incentive allows any company undertaking scientific and/or technological R&D in the country to deduct 150% of its R&D spending when determining taxable income.
Vendor financing and payment plans
This form of financing enables businesses to access technology without an initial large capital outlay because the vendor, or a third-party funder, offers deferred payment options, spreading the cost in installments.
Disadvantages of this financing option include inflated purchase prices and interest rates. In the long run, the cost may be greater than through traditional funding. Payments can limit cash flow, and the consequences of default may be harsh.
How to make a funding application stand out
Funding applications can be complex and timeous. Often, you must provide the funder with endless essential documents, from tax returns, income statements and balance sheets to cash-flow projections.
Lenders are more likely to approve your loan if the documentation is detailed and organised. To give your application the maximum chance of success, it must stand out. On top of the documentation listed above, you should:
- demonstrate the return on investment from technology adoption
- prepare detailed IT project budgets
- highlight operational benefits and efficiency gains.
Technology investment risks and considerations
There are always risks that come with investments. Consider these three factors, among others, when choosing how to finance technology investments.
Managing repayment alongside operational cash flow
To ensure your business can manage debt repayment alongside operational cash flow, incorporate repayments into your cash-flow forecast and include them as a scheduled outflow.
If possible, negotiate with your lender to align loan repayments with your business’s seasonal cycles.
Planning for technology obsolescence
To plan for technology obsolescence, ensure you have assessed your technology assets to understand their lifecycles and risks.
To guide future updates, develop a technology roadmap and plan to replace obsolete systems before they become high-risk. Continuous monitoring is key.
Security and compliance requirements
You must protect your business’s data and systems from security threats by implementing security controls, such as firewalls, encryption and multi-factor authentication.
Given the fast-paced nature of technology and the growing significance of safeguarding data, it’s also essential to ensure your business is up to date with legal requirements and IT compliance laws in South Africa, such as:
- the Protection of Personal Information Act (POPIA)
- the Consumer Protection Act (CPA)
- Cybercrimes Act of 2020
- the Companies Act of 2008
- the King IV Report on Corporate Governance.
Yalu: Unsecured loans from Yalu offer predictable repayment terms with no need to furnish collateral, helping mitigate financial risk while investing in digital growth.
Convenient and competitive: digital transformation funding online
Is your business ready to modernise its systems and embrace digital transformation?
Yalu can help your business finance technology investments with funding that is fast, convenient and competitive. Contact us to discuss your needs or apply online.
