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One of the biggest challenges facing many small business owners and young entrepreneurs is getting the funding needed to turn their vision into reality. After all, with no – or little – financial history it may seem there’s little point even applying for a traditional business loan. But, if you’re just starting out, don’t lose heart and make the most of any startup advice opportunities. There are actually plenty of funding options available to young entrepreneurs.
Grants and loans exclusive to new start ups (first time small business)
For starters, there are start up business grants and small business loans available exclusively to young entrepreneurs and first time businesses. One of the best known is the Small Enterprise Agency (SEFA). Their main function is to help provide funding for start up small business.
SEFA services are designed to help micro, small and medium-sized businesses. Grants and Loans from SEFA can range from as little as R500 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/or emissions reductions.
The fund gives loans to entrepreneurs and businesses who think green, wanting 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 aim is to assist them in improving their competitiveness and sustainability, to become part of the mainstream economy and create employment. The programme provides grants up to R1 million.
What about the government? Do they offer any help?
There are a number of government business grants available from the South African government, which has several schemes that have been set up to help small business development.
This 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-up and existing businesses up to R1 billion.
There’s also crowdfunding
More and more first time small businesses are turning to crowdfunding. This works by spreading the risk of investing in their business across a lot of investors who contribute just a small amount each.
It sounds complicated – how does it work?
It’s quite straightforward. There are two main types of crowdfunding which 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.
Read more on the UK Crowdfunding Association website.
Is it worth asking the bank?
Finally, just because you’re a young entrepreneur with a start up small 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 who’s willing to act as a guarantor. By having a guarantor, the startup small 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.
Being a young entrepreneur isn’t always easy, but there’s no excuse for letting 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 Intuit QuickBooks Resource Centre to help grow your business in South Africa today.