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Where Can Small Businesses Find Funding In South Africa?

Where Can Small Businesses Find Funding In South Africa?

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Dr Thommie Burger is the Founder of JTB Consulting

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There are more than 2.5 million small and medium-sized enterprises (SMEs) in South Africa, however, accessing funding remains still a major challenge for many entrepreneurs. To combat this, the country now has a growing alternative lending sector that is focused on providing funding for this market. SME lending is a massive gap and a global problem. As SMEs are the lifeblood of any economy, it’s important that these new financing players succeed and meet the needs of this market.

South African banks have historically focused on consumers rather than small businesses as businesses are less homogeneous and therefore more complicated to service. Our banks’ credit products are usually inflexible in their loan requirements and take a long time to process more complicated credit applications. Banks can at times provide better pricing than alternative lenders, but small businesses often need funding immediately as opportunities present themselves and they are willing to pay a premium for speed and flexibility.

According to Finfind, data shows that startup capital, buying equipment, expanding businesses and working capital are the largest funding requests in South Africa.

Different Types of Alternative Financing

Below is a list of some of the different types of alternative financing available to South African SMEs.

Fincheck

About them: Fincheck partners with South African banks, lenders and insurers offering a live and independent means of comparing and applying for finance across 30 lenders.

Who they serve: Business owners seeking finance in South Africa.

Amount: R20,000 – R72 million

Lulalend

About them: Delivers business funding using proprietary scoring technology, which offers an instant funding decision on applications.

Who they serve: South African businesses across all industries trading for more than one year with annual revenue of R500,000+.

Amount: R20,000 – R1 million

Fundrr

About them: Developed an automated credit model that analyses close to 100 data points to provide a complete picture of growth possibilities. This produces a ‘Fundrr’ score.

Who they serve: At least a 12-month track record, with a minimum of R1 million turnover or asset value.

Amount: R20,000 – R500,000.

Merchant Capital

About them: Offers merchant cash advances for retail businesses with flexible repayment terms.

Who they serve: Retail business owner with an average of over R30,000 in credit and debit card sales and has been in operation for more than one year.

Amount: Qualification of up to 100% of a business’ average monthly credit and debit card turnover.

iKhoka

About them: Offers card machines that accept debit and credit cards. After three months of trading, offers you a custom cash advance offer.

Who they serve: Check your offer in the iKhokha app and decide how much you need. The more you process through iKhokha, the bigger the amount you qualify for.

Amount: Depends on the turnover of your business over three months.

Zande Africa

About them: Provides trade and merchant finance to spaza shops.

Who they serve: You are looking to procure stock for your spaza shop. Spaza credit is a form of inventory finance that will assist you.

Amount: Lines of credit depend on the turnover of the spaza.

Bright on Capital

About them: Bright On Capital is an online peer-to-peer lender that provides affordable working capital funding to emerging small supplier businesses with sustainable growth prospects.

Who they serve: Small businesses that have been trading for at least 12 months, who are supplying one or more corporates or credit-worthy public entities, and are expecting to generate at least R1 million in annual revenues.

Amount: Small businesses can access revolving working capital facilities of up to R1 million to execute on procurement opportunities sourced from these qualifying large entities.

ProfitShare Partners

About them: ProfitShare Partners provides disruptive short-term capital solutions and transactional support to SMEs with valid contracts or purchase orders from reputable large organisations.

Who they serve: SMEs with no track record, financial history or security with low performance, short-term contracts (up to 365 days) or purchase orders with reputable large organisations.

Amount: Minimum of R250,000 up to R5 million per transaction.

Established in 2006, we have successfully written more than 12,500 Professional Business Plans for clients across 25 countries. As South Africa’s Leading Business Plan Company, we are confident that we would be able to assist you too. Kindly note that we also offer “Investor Pitch Decks”, “Excel-based Financial Models”, and “Proposal/Tender Writing Services” in addition to our Custom Business Plan Writing Service. Please visit our Services page for more information.

We look forward to being of service to you. Please feel free to contact our Founder, Dr Thommie Burger, on +27 79 300 8984 should you have any questions. He is also available via email and LinkedIn.

JTB – Your Business Planning Partner.

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