26 May

According to statics, 50% of small businesses in South Africa fail within 24 months of launch. While a report by the University of Western Cape revealed that between 70% and 80% of small businesses fail with 5 years.

Of course, a few factors contribute to the failure of small businesses but one of the main problems is the lack of proper funding for these businesses. While one of the biggest culprits of funding burnout is entrepreneurs approaching the wrong funder or applying for funding that they simply do not qualify for.

Private sectors including banks indeed have a high-interest pay back rate on business loans which may affect your business leading to failure. In today’s blog, UASA looks at a few funding options that are available for small business owners or start-ups from the government. These funds can help you towards building a sustainable business.  

Below are a few types of funding categories from government

Grants – grants are usually not repayable. The government lending agency provides for 100% of the financial need and they are typically once-off opportunities to assist new businesses.

Cost-sharing Grants – a cost-sharing will finance between 35% and 100% of a business. Grants that are less than 100% require you to fund the balance of finance required for the business.

Incentives – many incentives are grants where you do not have to repay the money. You have to fund your business and then claim back the portion of the money that the incentive covered.

Tax Incentives – a tax incentive means that the business may deduct a certain amount from the money it owes in tax.

Equity Funding – equity means that the government funding agency buys a certain part of your business in return for percentage shareholding.

Below are a few government departments that have funding for small businesses

Department of Trade and Industry (DTI) – The Department of Trade and Industry and its subsidiary agencies are involved in promoting economic development and they have funding available for small businesses where one can apply for consideration.

Green Fund – the Green Energy Efficiency Fund (GEEF) supports projects that will provide significant energy savings or emissions reductions. If your business aligns with GEEF policies, you can apply for a loan for consideration.

Tourism Transformation Fund – helps black-owned enterprises to benefit from South Africa’s growing tourism sector. If you are into the tourism business, you can certainly approach the Tourism Transformation Fund and apply for funding.

Growth Fund – the Growth Fund is a grant fund specifically for growing South African small businesses that need a cash injection to scale up further and create jobs.

Technology Innovation Agency (TIA) – Seed Fund – This grant funding is only available to individuals who are working with a higher education institution or science councils and are now looking to commercialize their research.

National Youth Development Agency (NYDA) – the NYDA provides grant finance in the form of micro-finance grants for youth entrepreneurship and co-operative grants for greater participation of youth in the co-operative sector. The program consists of both pre and post-approval assistance.

Industrial Development Corporation (IDC) – the IDC is a national development finance institution set up to promote economic growth and industrial development. They offer loan amounts of a minimum of R1-million with a maximum of R1-billion per project allowed.

Technology Venture Capital Fund – provides equity or debt funding to emerging technology-focused businesses to enable the conversion of technology-rich South African intellectual property into a market-ready product, and ultimately its commercialization.

Small Enterprise Finance Agency (SEFA) – SEFA is a joint venture and a consolidation of various funds including the Apex finance fund, KHULA, and a contribution fund coming directly from the Industrial Development Corporation (IDC). The maximum loan amount that one can get for their business is R5-million.

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