One of the biggest challenges that entrepreneurs face is raising funds for small business startup in South Africa to power their business ideas and ventures. South Africa is listed among the top-ranking economies with a favorable atmosphere for enterprise operation.
The lack of enough funding has hindered a lot of business ideas from coming to life. No business regardless of its size can prosper without sufficient allowance. Having a steady flow of resources for the running of your business can help develop your business and take it to the next level.
One of the qualities that makes you a foresighted entrepreneur is your capability to generate the capital you need for starting up your business. However, it is a relief to know that several organizations and agencies can be reached for startup funding. I would be sharing six sources of startup funding that can be accessed in South Africa.
The first step to being able to access funding from any of these six sources of funding for small business startup in South Africa is to register your business properly with CIPC here in South Africa. You will need to thoroughly evaluate your business to resolve which startup funding source works best for you.
Six Sources of Startup Funding in South Africa
1. Self Funding
Self-funding is often referred to as bootstrapping. This source involves using your personal finance to fund your business. Using your savings and seeking the help of your family and friends to generate your required capital is another form of self-funding.
Self-funding could also mean using the income from your part-time job to fund and build your business.
Self-funding helps you to keep the full management of your business while taking on all the risks involved. You also get to enjoy the profits of your business without having to worry about paying anyone back. Avoid overspending.
An E-commerce store is a business you can start with self-funding. It is simple to start up and can be managed from home.
2. Angel Investors
These are affluent people that invest in business startups that they like and believe in. They don’t put businesses through rigorous processes before choosing to fund them. Once they believe in the prospect of a business startup, they invest in it and help in whichever way they can to help it grow.
Many businesses can succeed but don’t measure up for a bank loan, angel investors invest in such businesses with the condition of having a legal share in them. South Africa has numerous angel investors in South Africa:
- Dazzle Angels are the top angel investors concentrated on women in South Africa and perhaps across Africa.
- Jozi Angels are perhaps the most popular and successful angel investors in South Africa.
- ExpertHub’s investor listings is an incredible location to discover some of South Africa’s well-known angel investors.
3. Government Allowance
There are different government units and agents that offer assistance to fund business startups in South Africa. Government funding does not require you to refund it but prerequisites for access can be very rigorous.
The process involves serious documentation. Again, your business has to be in line with the objective of the government unit you are applying to.
You must carry out a meticulous study on the funding you are applying for to know their motives and past beneficiaries to increase your likelihood of obtaining government allowance. Government units to reach include:
- Department of Agriculture.
- Department of science, sports, art, and culture.
- Department of Tourism.
Other government agents to reach are:
- Small Enterprise Finance Agency. (SEFA)
- Department of Trade and Industry. (DTI)
- National Empowerment Fund.
- Small Enterprise Development Agency. (SEDA)
- National Youth Development Agency. (NYDA)
4. Bank Loans
Ned bank, FirstRand bank limited and Standard Bank are some of the banks in South Africa that give loans to business startups that have the potential to succeed. These loans are offered at specific interest rates which are the forms of their return on investments. (ROI)
Most banks will require that you provide a business plan, expense sheet, balance sheet, cash flows, and a 5 years financial forecast before they can consider your business for a loan. These requirements inform them that they are making an intelligent choice in granting your business a loan.
South African banks have SME units with proficient SME consultants that could help you in re-examining your loan applications and suggest skilled guidance.
You should also make comparisons between proposals before making a final choice of the one that suits you best.
5. Venture Capital Investors
VC Investors are private investors that offer to fund businesses that are anticipated to have impressive expansion and enormous prospects. VC investors constantly want shares holding or a seat on the executive board traded for investments.
They always want some percentage of management and rights of your business for which they provide funding.
You can visit the website of the South Africa Venture Capital Association (SAVCA) to get an explicit list of venture capital investors in South Africa.
6. Crowdfunding
Crowdfunding is a source of startup funding that generates capital for a business from the public. The people involved in crowdfunding are called Crowdfunders. Crowdfunders don’t demand an ROI for their investment and they also don’t require a percentage of rights in the business.
It is a modern way of funding that involves creating a profile on the crowdfunding website and people send money to you through the profile. Crowdfunding usually works best for a product or item that a lot of people like.
Crowdfunders only expect a complimentary gift as an appreciation for their donation. It is a source of funding that has low risks and in the event of business failure, you don’t have to refund your crowd funders. Websites like Thundafund, Uprise, and Jump Starter make crowdfunding available to South Africans.
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Conclusion
Numerous options are available to you regarding raising funding for small business startup in South Africa as a South African to make informed choices. So what are you waiting for? Go ahead and explore the various accessible options and decide on the one that works best for you.
Get mentally and physically prepared for the necessary documentation and processes that some of these funding sources may require. Go on and take advantage of the various sources of startup funding in South Africa from the government and private agencies that we have examined together today!