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The Funding Options
Bank loans:
This is the best route for companies looking for funding of less than R1 million. There are very few venture capital or private equity firms that will invest amounts less than R1 million. Another alternative to a bank loan is angel funding. Banks will require security for the loan which is why many entrepreneurs turn to VC/PE or angel funding.
Angel Investors:
A term used for private, wealthy individuals that generally invest in young start-up companies, angel investments are sometimes made in exchange for equity or could be in the form of a loan. Unfortunately the network of business angels in South Africa is not developed and there is no formal association. However, there are a number of initiatives designed to bring together Angel Investors such as Quickberry. www.quickberry.co.za
Micro-financing:
If a company is looking for very small amounts, micro-financing is a good route to take. Micro-financers are organisations which offer finance quickly without requiring security. Great for immediate funding but interest rates can be extremely high.
Government Funds:
The South African government has a number of good incentive programmes for entrepreneurs and exporters. Some of these are readily accessible but the paperwork can take a lot of time. The Department of Trade and Industry website offers information on the various government incentives. www.dti.gov.za
Export Incentives:
The Small Enterprise Development Agency website offers comprehensive information on financing small businesses through the Industrial Development Corporation (IDC). The IDC provides matching funding to entrepreneurs who intend establishing or taking over businesses. www.dti.gov.za/thedti/seda2.htm
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