Small Business Funding and Grants in South Africa

Are you just starting out as a small business entrepreneur but lack the financial aid needed to start it up?

Jump-starting and expanding a business can be challenging, but thankfully, small business funding in South Africa from government and private institutions exists to help entrepreneurs’ businesses flourish. 

One of the biggest challenges facing many small business owners and young entrepreneurs is getting the financing needed to turn their vision into reality. After all, with little to no financial history, it may seem there’s little point in even applying for a traditional business loan. 

But, if you’re just starting out, don’t lose heart; make the most of any startup advice from mentors and organisations. There are plenty of funding options available to young entrepreneurs. This article will provide you with different types of government funding for small businesses and startups.

Small business grants and loans exclusive to new start-ups

There are small business grants available in South Africa, as well as small business loans available exclusively to young entrepreneurs and first-time businesses. One of the best known is the Small Enterprise Agency (SEFA). Their primary function is to help provide funding for small start-up businesses.

SEFA services are designed to help micro, small and medium-sized enterprises. Grants and Loans from SEFA can range from as little as R50 000 up to R3 million, with the loans paid directly to owners.

Specialised loans and schemes to make the world a better place (green energy grants)

The Green Energy Efficiency Fund (GEEF) supports projects that aim to provide significant energy savings and emissions reductions.

The fund offers loans to entrepreneurs and businesses who think green and want to invest in energy efficiency and renewable energy technologies. This makes their small businesses greener and more sustainable. The Green Energy loan amounts vary from R1 million to R50 million.

The Black Business Supplier Development Programme (BBSDP) is a cost-sharing grant offered to black-owned small businesses. The BBSDP supports the expansion of small enterprises rather than supporting start-up businesses. They aim to assist them in improving their product or service, competitiveness, and sustainability, to become part of the mainstream economy and create employment. The programme provides grants of up to R1 million.

Small business funding with the Department of Trade and Industry (DTI) 

The Department of Trade and Industry (DTI) aims to help entrepreneurs achieve their business goals to influence economic growth for the benefit of South Africa. 

DTI partners with different government institutions to support business competitiveness and provide manufacturing support. They also ensure that small businesses can gain better market access. 

DTI offers cost-sharing and loans for incentives and mentorship programmes for micro and medium-sized enterprises.

Here’s a list of a few of the different business funding they provide:

National Youth Development Agency (NYDA).

This funding scheme offers financial and non-financial aid to young entrepreneurs with promising business ideas. The NYDA aims to develop these individuals by placing them in a mentoring programme for a minimum of 2 years. Their funding ranges from R1 000 to R100 000. 

Business Process Services (BPS) 

The BPS programme aims to encourage investors to employ young talent for offshoring activities. These companies should have at least 80% of their youth workforce involved in a project to be eligible to apply for this grant.

National Empowerment Fund (NEF) 

NEF aims to empower the black community by including them in economic transactions. They offer financial and non-financial aid to teach members of the black community how to save and invest their money.

Support Programmes for Industrial Innovation (SPII) 

The SPII programme helps enterprises introduce significant advances in the tech industry by offering financial support for the development of innovative processes or products. This is because technological research and development is a priority to the South African government.

What’s more is that grants don’t require repayment, which will work in your favour.

What about government funding? 

There are several government business grants available from the South African government, which has several schemes that have been set up to help small business development. In fact, most of the programmes mentioned in this article are government-funded.

A popular government grant for small businesses includes the Industrial Development Corporation (IDC). Their role is to enhance the industrial capability of South Africa and to help boost economic growth and industrial development in the country. They do this by funding entrepreneurs starting new businesses or supporting companies that want to extend existing operations. They fund start-ups and existing businesses up to R1 billion.

There’s also crowdfunding

More and more first-time small companies are turning to crowdfunding. This works by spreading the risk of investing in their business across many investors who contribute just a small amount each.

How does crowdfunding work?

It’s quite straightforward. Two main types of crowdfunding may be helpful to you as a first-time small business owner.

• Debt crowdfunding draws together people to contribute to a loan
• Equity crowdfunding lets you raise money by offering a stake in your business in return for investment.

Some popular crowdfunding platforms in South Africa include: 

• Thundafund – Founded in 2014, Thudafund has grown to be one of Africa’s leading crowdfunding platforms. 
• The People’s Fund – This platform is primarily black-owned and since launching in 2017, has partnered with some of South Africa’s networking communities for black entrepreneurs such as The Hook Up Dinner and Playbook and Brownsense. 
• Uprise.Africa – Also launched in 2017, Uprise.Africa is an equity-based crowdfunding platform that allows private individuals to invest early in businesses in exchange for shares in the company.

Is it worth asking the bank?

Finally, just because you’re a young entrepreneur with a small start-up business, it doesn’t mean you should give up all hope of obtaining funding through a traditional bank loan. 

Many financial institutions may still loan you money, especially if you have a relative or close friend willing to act as a guarantor. By having a guarantor, the small startup business may have a higher chance of obtaining a grant or finance as the bank takes on less risk.

Friends and family to the rescue

You may find that someone close to you is prepared to invest in your business and help get your start-up business funded. After all, according to Entrepreneur Magazine, more than 38% of small business start-ups receive private funding from family and friends. If you don’t ask, you don’t get it.

Being a young entrepreneur isn’t always easy, but don't let a lack of funding stop you from achieving your business goals. There’s more help out there than you think – you just need to take the plunge and apply for small business grants.

Do you feel better informed about first-time small business grants? The QuickBooks Blog covers a wide range of business-related topics. It’s all part of the support we offer to small businesses in South Africa, including Tips on thriving in the Gig Economy and small businesses to start in South Africa.

Discover more free Small Business Resources at the QuickBooks Resource Centre to help grow your business in South Africa today. 

Frequently Asked Questions about Small Business Grants in South Africa