South Africa, despite an ailing economy, is in fact one of the best African nations for starting a business. However, having a viable idea is one thing, finding adequate funding is a completely different ball game. In this article, we will explore a number of small business funding opportunities which you could consider to get the ball rolling for your dream business.
Funding for small businesses.
Most businesses cannot successfully thrive without adequate funding. Regardless of whether your business is small, medium or large, having enough funding to start, run or grow your business is non-negotiable.
However, while you might not necessarily be the sole funder of your business, an essential quality of being a proactive entrepreneur is the ability to raise the necessary capital to start or sustain operations. Furthermore, to make things easier for new companies, there are many business funding solutions which are available. Entrepreneurs, for instance, can set up meetings with small business financing companies such as LulaLend or even apply for the many available government funding initiatives.
Where to get funding for your startup.
There are multiple channels which business owners can access to secure adequate funding for their businesses. Let’s explore the top five, which you can consider:
1. DTI funding for small businesses.
There are several funding schemes which the Department of Trade and Industry (DTI) have made available to people who are starting new businesses or already have existing ones. Some of these schemes take the form of loans or grants, while many others are cost-sharing incentives. Furthermore, these incentives include Agro-Processing Support Scheme (APSS), Automotive Investment Scheme (AIS), Business Process Services (BPS), and Manufacturing Investment Programme (MIP).
2. NYDA business funding.
Another great platform for raising funds for small businesses is the National Youth Development Agency. They specifically work with the youth in South Africa to develop and promote coordination in matters which are related to their development. The grant programme gives young entrepreneurs opportunities to obtain financial and non-financial support for the development of their businesses. Included in the non-financial services are mentoring, co-operative development as well as business programmes and consulting services.
3. Bank loans.
Quite interestingly, there are many banking institutions in South Africa which offer funding loans to small and medium enterprises. Banks such as Standard Bank, FNB and Nedbank offer limited capital to entrepreneurs who have viable ideas with promising potential. However, there are specific criteria which each of these banking institutions have implemented which prospective borrowers are required to meet before these funding opportunities can be accessed. Moreover, these banks also give out their loans at a specified interest rate, which the borrower is liable to repay as per the agreed rate. That being said, we advise researching the requirements to determine if you’re able to benefit from such opportunities.
4. Small Enterprise Finance Agency.
The Small Enterprise Finance Agency (SEFA) was developed to foster the establishment and growth of small and medium enterprise and in an effort to contribute to alleviating poverty and creating job opportunities in South Africa. One of the ways in which they achieve this is by awarding small business loans to South African business owners. Since it was established in 2012, SEFA has been granting business owners access to the capital which they require, efficiently and sustainably to get their ventures and ideas running. Notably, business owners can obtain between R50,000 and R5 million from SEFA as loans.
5. Isivande Women’s Fund.
How does one go about obtaining government funding to start a new business? If you’re considering applying for government funding for your business, there many sources which the government has put in place to help fledgling entrepreneurs. In addition to those mentioned above, there are others where you can get information about and access to those who manage the funds. If anyone requires capital between R30 000 and R2 million, they can submit applications which are then reviewed by the IWF.
Obtaining business loans in South Africa.
Among other means, loans have remained among the best options available to small businesses. Those who are at the beginning stage of starting a business or who have been running one already have long found this option useful. Certain financial institutions grant startup business loans with many of them being banks. Another option is going the route of small business funders, such as LulaLend. Of course, you’ll be required to pay back these loans at interest, but if they deem your business idea as one that is viable, they will grant your request.
How to get a business startup loan.
Even though many financial institutions are willing and able to grant anyone a loan, there are a number of factors which they take into consideration to determine the eligibility of whom they are granting loans to. Thus, the following are some of the things which you need to be aware of.
1. Develop a detailed business proposal.
Before your application for a loan is even considered, the first thing you need to do as a business owner is to provide precise details as to what you require the loan for. You can’t expect lenders to figure this out for you. Moreover, when writing your proposal, you have to ensure that you’re as explicit as possible as to why you require the funds. Regardless of whether you communicate your purpose during a face to face interview or via your proposal, ensure that nothing is left unclear.
2. Compile and supply the necessary documents.
You need to ensure that you are aware of the documents required by lenders. One of these documents is the registration document of your business. The reason lenders require your documentation to be in order for them is to consider your reliability and ability so that they don’t pump money into the wrong channels. That being said, if you’ve not registered your company yet, you can read our piece on how to register your small business in South Africa.
4. Credit score.
It’s vital to remember that before any financial institution considers one for a loan, one of the first things they take into consideration is the eligibility to the applicant. They do this by checking the said applicant’s credit score. This means, you, as the applicant, need to check up on your credit reports and scores. The lower your score, the more challenging it becomes to be considered for a loan.
5. Financial record keeping.
It’s a wise move always to have accurate and stable financial statements as it’s one of the requirements which these funding agencies usually check, especially if you’re already running a business. Your income statements, balance sheet, cash flow statements and others are commonly considered by lenders to confirm your ability to repay the loan you obtain.
Remember, you are never alone when it comes to your business idea. If it’s viable, there are many small business funding options from both the government and private institutions which your business can secure funding from. Ensure that you have all your ducks in a row before applying, and put the above tips to use and you should be smooth sailing in obtaining funding for your small business.
If your business requires financing, please visit the LulaLend business page to access their contact and services information to see if you are eligible for a small business loan.