GOVERNMENT GRANTS? COMMERCIAL LOANS? EQUITY FUNDING?
As an entrepreneur, you have few choices when it comes to funding your business. The South African Government offers more than 70 different programmes to fund and grant businesses, and in effect to make a difference to the economy. There are also other opportunities like commercial banks, venture capitalists and angel investors, and they are all focused on providing funding for business ventures.
The South African Government has recognized that entrepreneurship and the support of Small, Medium, and Micro-Sized Enterprises (SMME’s) is a strong catalyst for achieving greater economic growth and development. There are numerous funds and incentives available to support your business venture and turn your entrepreneurial dreams into a reality.
There are an array of incentive schemes to stimulate and facilitate the development of sustainable, competitive enterprises by providing incentives that support national priorities. A variety of incentive schemes seeks to support the development or growth of commercially viable and sustainable enterprises through the provision of either grant funding or tax relief, thereby ensuring the creation of new and lasting jobs.
The intention is to increase participation in various areas of development. Most of the incentives are housed within the Department of Trade and Industry, with a few others in other government departments.
The DTI is the Government arm which has been tasked to encourage actively small business by offering funding solutions as a path to economic growth, and they describe their role as a ‘valuable partner to any South African entrepreneur.’ The DTI provides financial support to various economic activities, including manufacturing, business competitiveness, export development and market access.
They are actively looking for existing business owners, who will positively impact South Africa’s commercial environment and ultimately create valuable jobs. (www.dti.gov.za)
In addition to grants, the South African Government makes available a range of loans to the business sector. Government Institutions like NEF, Landbank, SEFA and IDC give out loans with a lower interest rate or require a smaller amount of collateral. The Government Institutions lend up to 90% of the required amount to start or expand your business.
This is the most well-known type of finance, largely due to the significant amount of advertising and marketing by the four big banks in South Africa. Basically a bank will loan your client the money provided they have an asset that can act as security and that your client can assure them of good possibility of being able to repay the loan in good time.
Commercial banks give out loans to earn interest rate and bank fees. South African banking fees are high in comparison to other countries. Keep in mind sometimes it can be the quickest and easiest way for your client to apply for a loan with their own bank. Most of the time your client still needs a bankable business plan – and this is where you come in.
Very simply put, equity deals involve giving away a percentage ownership of your business in return for funding, resources or skills. How these deals are structured can take a variety of different forms, but the basic principle is the same: equity is given away in order to gain the things that will help take the business forward to the next growth level.
Because most entrepreneurial ventures are almost perpetually cash-strapped, they either can’t afford to buy in the skills and resources needed, or they can’t access the funding required to grow. In many instances, the only thing they possess is the equity in the business and this is used as a means of exchange for what they need but cannot access through other means.
WHICH ROUTE IS BEST FOR YOU?
If you want to streamline the funding process for your business, and fast-track your way to funding sucess, our experts are able to assist you every step of the way. They can accurately advise you on the best program for your business and guide you through the application process.
According to your requirements, We will identify the most suitable program and make sure that you have everything in place. We can also support you to submit a high-quality grant application, taking into account all the requirements of the application, to secure your approval.