Many South Africans still struggle to obtain financial assistance for their businesses. Banks and traditional lenders want startups and businesses to meet strict lending criteria or need collateral to enable businesses to gain access to a loan, pushing many out of the market.
Businesses that meet these criteria have to overcome the next hurdle: exorbitant interest rates and short repayment periods. This makes it difficult for the company to maintain profitability. That’s why more South African businesses who want access to affordable funding turn to the government to get financing.
However, the challenge with government funding for a business is that finding an appropriate loan or grant scheme requires tonnes of research. To help you get started, you can review this guide on how to get government funding for your business.
Is It Hard To Get Government Funding for Your Business?
Spending time and resources to apply for government funding may not be worth it for your business if the process will take longer than expected or you may get rejected.
In South Africa, getting government funding is like dealing with any other government department: delays and complications are par for the course. Instead of being surprised when they occur, expect them to take place. However, you can avoid extensive delays by determining what documentation the government agency you are approaching for funding needs. Then have all those documents ready when you apply.
Your concern shouldn’t be whether or not providing certain documents will lead to rejection. Because by providing all necessary documentation, you accelerate the process, which will allow you to make contingency plans if necessary.
Step by Step Guide to Get Government Funding for Your Business
Getting government funding for your business in South Africa is a complex process that requires plenty of preparation work and research to have a successful application process. So, if you are interested in obtaining government funding, you should carefully review the four-step process below.
Step 1: Find The Necessary Government Agency to Approach
Entrepreneurs and businesses requiring funding from the government will first need to find and research the appropriate government agency and corresponding fund before applying for financing. Since there are many government funds in existence, this list will help you find a fund that meets your businesses needs.
National Empowerment Fund
The NEF funds businesses primarily (50.1%) black (African, Coloured, Indian) owned. The business must have operational involvement and board member participation from black South Africans. The business must also be able to pay back the NEF. If your business meets this – and other general – criteria from the NEF, it will go through various stages of assessment before an outcome is made.
Women Empowerment Fund: The WEF forms part of the NEF and requires the business to have 51% black female ownership and be commercially viable. The fund provides funding from R250,000 to R75 million in equity or debt. To access this funding, you will also need to meet other funding criteria by the Women Empowerment Fund.
iMbewu Fund: The iMbewu fund gives entrepreneurs, startups, and expanding businesses funding between R250,000 to R15 million. The fund also assists with franchise funding. These funds are given as term loans, equity, or quasi-equity and require businesses to meet stringent criteria to gain access.
uMnotho Fund: The uMnotho fund provides capital for acquisition, new ventures, expansion, liquidity and warehousing in the amount ranging from R2 million to R5 million.
Rural, Township and Community Development Fund: This fund’s purpose is to give funding to businesses with at least a 25.1% black ownership who are acquiring, launching, or expanding in underdeveloped communities in South Africa.
Strategic Projects Fund: The aim of the Strategic Project Fund (SPF), is to help black (African, Coloured, and Indian) people achieve participation in early-stage projects that focus on DTICs National Industrial Policy Framework.
Arts and Culture Venture Capital: To develop the arts and culture sector, the government launched the Arts and Culture Venture Capital programme. The program provides funding between R250,000 to R5 million for projects in arts and culture that have a 50.1% shareholding by black (Coloured, African, and Indian) South African citizens.
Tourism Transformation Fund: To increase participation by black South Africans in the tourism industry, the Tourism Transformation Fund was launched. The fund will assist black-owned businesses to expand and grow. Before applying, businesses must make sure they meet the TTF’s guidelines and have completed the TTF checklist before sending an application to [email protected].
If you are interested in applying for any of the above-mentioned funds, you can contact the NEF on 0861 843 633 or email them at [email protected] for general enquiries.
The Department of Trade Industry and Competition
The Department of Trade Industry and Competition (DTIC) has over 20 incentives, grants, and schemes existing and startup businesses can access. These schemes cover the manufacturing, agriculture, aquaculture, automotive, industrial, export, film, clothing and textiles, infrastructure, manufacturing, and technology industries.
To find a detailed list of each grant or scheme, visit the DTICs website and click on Financial Assistance in the top navigation bar. From there, you will be able to access the extensive list of programmes, including qualifying criteria and guidance to access each scheme.
If you need any assistance, you can also contact the customer care line on 0861 843 384.
SEFA
Presently, SEFA has four active products available for existing and startup businesses in different industries. Each of these products has different qualifying criteria and target various sectors.
Township and Rural Entrepreneurship Programme (TREP): The purpose of this programme is to offer assistance to informal, micro and small enterprises and cooperatives within the township and rural economies. These programmes target aftermarket auto businesses, bakeries, spaza shops, clothing and textile businesses, tshisanyama and open-air food businesses, in addition to informal traders.
Small Enterprise Manufacturing Support: For smaller businesses wanting to expand or launch in the manufacturing industry, SEFA provides financial support up to R15 million, of which 20% can be given as a grant. Businesses need to meet other qualifying criteria. Once you’ve established your business meets the minimum qualifying criteria, you can email [email protected] for an application form.
Direct Lending Products: Like a bank, SEFA provides existing South African businesses with loans. These loans range from R50,000 to R15 million. They can be accessed by any industry in the form of a bridging, revolving, or term loan.
Wholesale Lending Products: For cooperatives, funds, and businesses that provide other businesses with loans (intermediaries), SEFA offers loans of up to R150 million.
You can find out more about the products offered by SEFA by calling their head office on 012 748 9600, or visiting or calling a regional branch.
Technology Innovation Agency
The TIA’s purpose is to act as an intermediary, connecting businesses to relevant government funds. However, the agency focuses primarily on technological innovation in healthcare and natural resources in addition to providing development opportunities for SMMEs, higher education institutions, and entrepreneurs.
You can find out everything you need to know by visiting the TIA’s website.
National Youth Development Agency
The National Youth Development Agency has a host of products and services. However, in terms of government funding, they provide grants, sponsorships, and vouchers.
NYDA Grant Programme: The NYDA grant programme gives qualifying businesses and startups funding between R1,000 and R200,000. This programme also includes compulsory non-financial assistance in the form of business mentorship, market linkages, and training.
NYDA Voucher Programme: The NYDA Voucher Programme intends to help businesses get free business development services from companies that partner with NYDA. In the application process, you will need to specify what your business does and what your business needs. If you are approved, you will receive a “voucher” to access the services you need.
To find out more about youth funding, you can contact NYDA at 087 158 4742 or email them at [email protected].
The Industrial Development Corporation
The purpose of the IDC is to assist in the creation of globally recognized and internationally competitive industries. As a result, they only provide funding and assistance to select sectors, including those in:
- Agro-Processing & Agriculture
- Automotive or Transport Equipment
- Chemicals, Medical & Industrial Mineral Products
- Energy
- Infrastructure
- Machinery, Equipment, & Electronics
- Media & Audio Visual
- Mining & Metals
- Textiles & Wood Products
- Tourism & Services
Step 2: Prepare All Documentation
Before you apply for government funding, prepare the documentation needed by the corresponding funds you are applying to.
If part of the documentation requirements include a business plan or other formal documentation, and you don’t have finances to prepare items like a business plan or financial forecast, approach SEDA. SEDA has many development partners that they can put you in contact with who can assist at either a reduced cost or for free. This may extend the time required to get funding but reduce the cost of the application.
Step 3: Attach All Necessary Supporting Documents
Be sure that you have every document required in the funding application. The employees reviewing your funding application could be processing hundreds of applications a week, which means they are less inclined to follow up about a missing ID or financial statement. Instead, without these documents, your application will either be declined or delayed.
Therefore, before you submit your application, ensure you’ve attached the necessary documentation and have completed the application form in the correct format. If you have any questions, ask before submitting your application.
Step 4: Follow Up Consistently
The most critical part of any loan or business funding application is following up. Sometimes you may miss a call or email requesting additional information, or your application could have been overlooked.
For that reason, try to follow up with each agency you’ve applied for funding through at least once every two weeks. If your financing needs are urgent, follow up once or twice a week.
Since government funding has more favourable repayment terms – compared to banks – they may require you to participate in training or development as part of the funding scheme. They may also provide some of the funding or grant in the form of other assistance like a business location, equipment, or recruitment assistance.
