How to get funding for a small business

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How to get funding for your small business in South Africa

Some say money makes the world go round. We say that businesses need money to operate. Are you looking to get funding for your business? We had an interesting chat with Bean, the owner of a video production company.

This underdog shared his thoughts on popular questions about funding businesses in South Africa.

Read the practical tips about a small business owner's business funding experiences.

How did your small business get funding in South Africa? 

“So what happened was I left a full-time corporate job. I resigned from my job. I got my pension payout, and at the time, the law allowed you to cash in your entire pension. Yes, there were tax implications, but I could cash out my pension fund and use that pension money to start up my business.”

What was the best way to get funding for your startup?

"I think using my pension money wasn't the wisest idea. I should have reinvested those pension funds back into my other pension, but I didn't really know where to go for business funding. 

"It's a challenge with many startups because we don't know where to get funding. Some entrepreneurs know that funding is available, but it's somewhat elusive. We don't really know what to do, who to speak to, and so we've just found whatever means possible to get funding."

How much capital is needed to put up a small business?

"It depends on the type of business. From my experience, my pension fund covered me for three months, and I'm sure there are fence accountants who know better. 

"Still, I would almost imagine that you would need at least three months' salary to get a startup going because after 90 to 100 days, you are really in the groove of things. You almost need to write off those first three months because you might just break even. Still, you've got the money to pay the bills to keep the lights on and even buy some equipment or rent things you need. So yeah, I think three months for my experience is an absolute minimum.

"I didn't have lots of money when I started my business. The pressure was on from the beginning to really start getting more clients and getting more money in, so I see that as an advantage in some ways. Perhaps if I had lots of funding, I wouldn't have been as eager or hungry to find your work. I needed to go out there and secure clients, and putting in extra hours was a great motivator for me."

Which organisations fund small businesses? 

"I know there are lots of entrepreneurs finding funding. I just don't know the people. I know there are innovative Kickstarter projects, and there are many ways to get that funding. You can't just walk into a bank and get a business loan on the same day. I do know that banks fund some businesses. Many other companies could probably be better suited for funding."

Can you get funding for your business with just an idea?

"You probably can't. Any person who wants to give funding will do due diligence on you. They would like to see if you're getting your business plan or models or what kind of market research you have done. They could also want to know about your cash flow projections, how you anticipate the market will respond to your idea, a marketing strategy and more. Unless your concept will completely change the world and you are at the right place at the right time. 

"Most often, banks or other lenders need to know that they can trust you with the money. People are not going to lend you money unless they can trust you. So there are a lot of checks and balances that need to be done. I think this is where many entrepreneurs also struggle because they have a brilliant idea, but they don't know that they have to have all these other things in place. 

"So there is a real need to educate entrepreneurs about what they need to do to get funding for your business."

Justin had some interesting thoughts about business funding. Do you still want to know more about business funding? Read on to get the full lowdown on small business funding.

Learn more about getting funding for small businesses

Let’s take a closer look at business funding in South Africa.

Lack of funding

The COVID-19 pandemic has made things challenging at times for small business owners to manage their businesses, never mind those wanting to start businesses. But don’t stress and don't give up – there is an opportunity to succeed in every challenging situation.

What follows are some ideas that can help you secure some funding for your business.

Startup funding

Like water is to a plant, cash is to a business. Without any water or ka-ching, it’s not going to work. No matter how big or small your business may be, you will require access to startup capital.

As the saying goes, this separates the men from the boys – being proactive in raising the needed startup capital. And you can do it because some funding opportunities are waiting for you out there. You can meet with agencies or the Government that fund small businesses.  

There are many ways to get startup funding in South Africa. Let's explore a few popular business funding options.

The DTIC funds small businesses

The Department of Trade, Industry and Competition (DTIC) has cash available for new or existing businesses. These come as different packages such as loans, grants, or cost-sharing incentives. These incentives consist of the Automotive Investment Scheme (AIS), the Agro-Processing Support Scheme (APSS), the Manufacturing Investment Scheme Programme (MIP), and the Business Process Services (BPS).

What about the NYDA?

The National Youth Development Agency (NYDA) also offers to fund the youth for small business opportunities in South Africa. They also provide mentoring, consultancy services, and programmes on cooperative development and business management.

Can a bank help?

You could approach several banks for small business loans. You have to qualify for a business loan. You have to pay back the loan plus the interest at an agreed rate, which is the amount the bank charges for the loan over a certain time. 

How to apply for a bank loan

There are usually a few steps involved when it comes to applying for a bank loan, which can take some time. You might need to write a professional business plan, consisting of a marketing plan, a financial plan and an operational plan, with their corresponding strategies. 

Do you want to learn more about business loans?

Read everything you need to know about business loans now.

Try the IWF

Isivande Women’s Fund (IWF) provides entrepreneurs with funding for small businesses. Submit an application if you need moolah ranging between R30 000 and R2 million.

SEFA could also help you

Established in 2012, the Small Enterprise Finance Agency (SEFA) supports small businesses by making loans available, ranging between R50 000 and R5 million. SEFA also aims to alleviate poverty and create jobs in South Africa.

Will you start a new business?

So, do you want to start your own business? Find out more about how to start a business in South Africa.

Cash advances for qualifying Yoco merchants

Yes, that’s right – Yoco offers flexible cash advances for entrepreneurs like you who have a small business and qualify. To access Yoco Capital, go to your Yoco Portal to see if you qualify. After qualifying, you’ll get immediate approval, and the cash will be there within a business day. Every time you make a sale, Yoco will take a small percentage to enable you to pay off your loan.

Go from being an underdog to a household name, here's to your future business success.

Source: Top 5 Best Small Business Funding Resources in South Africa 2021

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