Small business loans in South Africa

Find out everything you need to know about small business loans.


What you need to know about business loans

To get hold of a loan for your small business could be a challenge, to jump through many hoops. But, hey, don’t be put off because you have a chance to get the funds your business needs.

Some apply because they need more stock, take on more staff for their growing business, have a better cash flow or improve their business equipment. 

Let’s dive into more detail with practical info about business loans in South Africa. We had a chat with Natalie, who owns a hair salon, to talk about her experience with business loans.

We asked Natalie, the small business owner, popular questions about getting business loans.

Have you applied for a business loan before?

“I contacted my business bank for a business loan but it was not possible to get one for my business.

"Then, I spoke to my father-in-law, who loaned me the money I needed to start my business. But unfortunately, I couldn’t meet my business bank’s requirements to apply for a bank loan. I also never thought of contacting other banks or lenders. I’m quite cautious and nervous when it comes to dealing with banks and other money lenders.”

Why did you need a business loan?

“I needed a business loan to buy the hair salon that I had previously managed for another owner. I didn’t have the money to buy the salon myself.”

Did you know about companies offer a variety of loans or cash advances to businesses?

“No, I didn’t think much about that because I first thought of my business bank, and then I went to my family next to see where I could get a loan.”

Do you have tips for small business owners that want to get business loans?

  • “Please do your research. Consider as many options as needed.

  • "Don’t rush it - read all of the fine print and be aware of how much money you will need to pay.

  • "Be mindful of the amount of interest you will have to pay back.

  • "Please get someone you trust and who is qualified to help you with the paperwork and get the best deal.

  • "Don’t fall for your feelings when making decisions.

  • "Keep calm and make sure that you do what is best for you and your business.“

Did you consider getting a business loan again?

“I was able to get an overdraft with my business bank account. My family also helped me when I needed money from time to time. I also got a credit card from my personal bank. But it is tempting to get a loan with those rainy days in mind.”

It was great to hear what Natalie had to say about business loans and how she ended up funding her small business.

Are you still curious about business loans? Read on to find out more.

Learn more about business loans

The South African government provides a few financial sources to get you going as an entrepreneur. These include grants and incentives.

Also, you can ask friends and family and knock on banks' doors.

But don’t despair if you can't succeed – there are many other funders out there willing to help you, but usually covering a short period. Such loans are friendly, which means the repayment terms are negotiable. As a business owner, you can apply online to see if you qualify. The only requirement for getting a loan is that your business must have been operational for a year.  

It could be easy to apply

There are many lenders out there who can help you. With no hassles with paperwork, it’s easy to apply online on their websites for business loans. Once you get the okay, you’ll get your cash usually within a week. Please be careful to consider loans only from well-respected lenders.

How much do I need to pay back?

You can find out how much moolah you need to pay back each month by checking out the calculator available on the lender’s website. Of course, the fees depend on your business’s annual turnover or how much it makes in one year. Please check that there are no hidden costs. You can also ask for an immediate quote from some lenders.  

How will you fund your business?

The work that goes into funding your business can be complicated. So, speak to the right people to get financial advice.

Certified financial advisers, that are friends or family would have your best interests in mind.

A financial feasibility study will show the amount of start-up capital needed, who will supply capital, operating costs, cash flow, and returns on investment. Will you apply for a business loan, or will you save up and use your own money?

How will your business handle the money it makes?

Your business will offer services or products to future customers who will pay you. How will they pay you?

Do you need to offer them a convenient card machine to use? Yoco offers card machines for every need and at affordable rates. Please browse our range of awesome card machines. Do you need to integrate your card machines into a point of sale (POS) system? Yoco also offers a POS integration option that you could use.

Are you looking to provide your customers with a cool online payment option? Yoco Link is a safe and easy way to get paid if you don’t have a website for your business. Yoco Vouchers are a great way to raise funds and get support from your customers.

Do you have a business website? Yoco Gateway is a safe and convenient way to get paid via your website.

How to get the money to start your business

There are many potential ways to fund your business:

  • You could save up and use that to start your business. 

  • A business loan or a loan from friends or family could also be possible options. 

  • If needed, you could contact banks and other financial institutes for a business loan.

  • Yoco offers flexible cash advances to our qualifying merchants with our Yoco Capital product that could help fund your small business.

Here are some tips that could help you get funding from a bank or other financial institution:

  1. A brief presentation:
    Why should the banker lend you money? Tell him why your idea will work, your financial need, the pay-back date, and the amount of security available. 

  2. Give financial information:
    Provide details about the money your business has made (income statements), and you may need to guarantee a loan. You need to repay your future business loan. So, you will need to explain how long you think it will take to repay the bank loan (cash flow projection).

  3. Make sure you present yourself well:
    Show the financer you’re trustworthy and capable. Highlight when the loan will be repaid in your presentation and reassure the financial institute.

We encourage you to contact the potential business loan provider to find out what is needed for you to apply for a loan.

Registering your business: types of businesses in South Africa

There are a few types of businesses to choose from that could serve your needs. You might know some of the business types already. These are the types of businesses you could start in South Africa:

  1. Sole proprietor
    This is the simplest type of business and many businesses in SA start this way. Inform the South African Revenue Service (SARS) if necessary. Should the business fail, creditors will recover their debt from your assets.

  2. Partnerships
    A partnership results from about 2-20 people agreeing contractually to do business together, split profits, contribute individually, and are liable for debts.

  3. Companies: PTY (Ltd)This applies to most entrepreneurs, especially when their business matures. Such companies are registered with Companies and Intellectual Property Commission (CIPC) and must provide an annual return. Also, CIPC will register your company name on the CIPC’s official website.

Besides the professional image, companies have the advantage of being controlled by accounting reviews, while several people can own the business. Also, personal assets cannot be touched when the company is in debt. 

Registering your business: CIPC registration and taxes

This sounds scary, but there's nothing to worry about if you know what you're doing.

Every underdog needs to keep their cool. Spend time getting familiar with all of the legal jargon and requirements before getting financial advice and registering your business.

Once your company is registered with CIPC, it automatically registers with SARS, while the proprietors register directly as provisional taxpayers.

What does the law require? First, you might need to register your business for tax and other employee-related legal requirements.

You might need to register your business for income tax, Value Added Tax (VAT), Pay As You Earn (PAYE), Compensation for Occupational Injuries and Diseases Act (COIDA), and Unemployment Insurance Fund (UIF), which we’ll describe below:

  • VAT is the 15% extra that VAT-registered companies add to the prices of their goods or services, and they then pay that money to SARS. You will need  to register your business as a VAT vendor with SARS, if the total amount of money your business makes in one financial year (annual turnover) is R1 million or more. 

  • PAYE is the monthly tax that gets deducted off most enployees’ salaries each month and paid to SARS. If your employees earn more than R40 000 per year, you must register the business for PAYE tax contributions. You should also register your business for the Skills Development Levy (SDL) if monthly salaries exceed R500 000 per month.   

  • Any business with one or more full-time employees must register with the Department of Labour and COIDA to protect your employees. Employees that are disabled or get a disease while at work are compensated financially via COIDA.

  • All employers must register their employees with the UIF online or at any SARS office. UIF could pay ex-employees a monthly income for a time while they are unemployed. Your business could pay UIF contributions for all employees to the UIF.

Find out more about municipal by-laws where your business will be located by getting in touch with your local municipality and talking to other local business owners. 

Tax laws often change, so please consult a certified professional to get the most up-to-date information and advice.

Who will manage your business’s finances?

South Africans are resourceful. Many small business owners upskill themselves to manage their business’s finances.

For example, you could study a course and get tips from other business owners that they trust to help them. You can also learn more about managing your business finances on the Yoco blog.

Financial business professional people, like accountants, could assist you with your business's finances, including bookkeeping, tax requirements, financials and anything else relating to the financial aspects of your business. Also, they can help guide you regarding using your funds most effectively.

Who could help you start your own business?

There are many ways to get help creating your new business in South Africa.

We've listed a few of these potential resources below:

So, ready to start your business?

You have the chance to start your own business in South Africa if that is the right move for you. You could also get the support you need to be successful. So, what are you waiting for now? Get in touch to see how Yoco can help you.

Disclaimer: *Please get financial advice from a certified financial adviser. This article is for informational purposes only.

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