The most popular type of loan for start-ups is one with an alternative lender and the positives of applying for a loan with an alternative lender is that your business doesn’t need to have a perfect financial status and the loans can be approved almost instantly. The downside of using an alternative lender though is that interest rates can be significantly higher than those charged by a bank.
Alternative lenders in South Africa (SA) include Business Partners Limited, Sanlam Cobalt or Old Mutual’s Masisizane.
While for banks there’s Absa SMME fund for start-ups who lack the sufficient security required to obtain a normal loan or credit. While Nedbank offers the StartUp loan for a business which has just started, or is less than two years old. You need to apply for a minimum of R100 000, and with that you get added bonuses such as unlimited debit orders, internet banking, and unlimited cash deposits.
Unlike banks or other financial institutions, angel investors are wealthy individuals who are willing to take a chance and invest smaller amounts of money in high-risk businesses, with the hopes of gaining high returns within a set period of time. This funding opportunity is a common second round of financing for high-growth start-ups. Because it’s extremely high risk, and a very high return on investment is normally required.
Angel Investors in SA include Angel Investment Network or Angel Hub Ventures.
And in government there’s National Empowerment Fund (NEF), which offers a funding for start-ups and expansion as a loan, equity funding and it currently supports B-BEEE and previously disadvantaged individuals and communities through these funds.
- iMbewu Fund for new businesses and those expanding with funding ranging from R250 000 to R10 million.
- uMnotho Fund for entrepreneurs buying equity shares in established black and white owned enterprises, starting new ventures, expanding existing businesses and BEE businesses that are or wish to be listed on the JSE.
- Rural and Community Development Fund has three products: Acquisition finance, Expansion Capital, Project with funds finance ranging between R1 million and R50 million
- Strategic Projects Fund provides Venture Capital Finance aimed at developing South Africa’s new and strategic industrial capacity within strategic sectors identified by government as key drivers to economic growth.