Accessing a Small Business Loan from the South African Government


One potential source of finance every aspiring entrepreneur should consider is a South African government loan. Here’s what you need to know…

Many small businesses in South Africa and in fact all around the world really struggle when it comes to accessing an affordable source of business finance. Unfortunately, having a great idea does not constitute a business and bringing that idea to life requires capital that many entrepreneurs simply do not have.

There are many different sources of funding people can use when starting a new business. Some use the good old bank of mum and dad, which unfortunately is a luxury not everyone has. Others use personal savings or instant cash loans from lenders to boost their coffers before launch. There are also a growing number of entrepreneurs who turn to alternative funding streams like crowdfunding and peer-to-peer lenders to take their idea from drawing board to board room.

One potential source of finance every aspiring entrepreneur should consider is a South African government business loan. They can be an extremely cost-effective method of accessing the funds you need, but there are strict selection criteria and plenty of paperwork which could act as a deterrent. Here’s what you need to know…

What is a government business loan?

Business loans available from the South African government tend to offer low-interest rates and often have more flexible and longer repayment terms than loans from financial institutions. This can make them extremely attractive for start-up businesses that meet the qualifying criteria. This type of loan is most commonly available from Department of Trade and Industry and the Small Enterprise Development Agency.

What different loans are available?

Currently, in South Africa, there are three different types of business loan available to entrepreneurs. That includes:

  • National Youth Development Agency (NYDA) – This government organisation not only offers money to start-up businesses but it can also provide mentorship, facilities and development programmes. The only catch is that you must be between the ages of 18 to 35 to apply. You must also be motivated by profit and have the necessary skills and experience to run the business on a day-to-day business. Visit the NYDA website for more information.
  • Khula – This is the agency responsible for small business finance in South Africa. It is able to provide up to 10 percent of the amount an entrepreneur wishes to borrow to kick-start their business without assets having to be put up as collateral.
  • Isivande Women’s Fund – This fund has been created exclusively for female entrepreneurs by the Department of Trade and Industry to encourage a new wave of South African business owners. To qualify for a loan, businesses must have at least 50 percent share of female shareholders and managers and have growth potential. The businesses must also have been in operation for at least six months and be able to have a social impact in the form of job creation or social empowerment.

Could any of these government loans provide the capital you need to get your business off the ground or take it to the next level? It’s certainly something to explore carefully before securing more expensive finance or potentially giving away equity in the business.

By Stephen G Davies MSc

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August 10 (Thursday), 2017 |

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