Running a business in South Africa can feel like a rollercoaster ride right now.
However, knowing how to get funding for small business ventures is the safety harness that keeps you in place.
Business owners must juggle several funding challenges right now. If you’re one of them, you’ll know failure to do so means:
- A hit to your business’s cash flow, causing operational problems that can frustrate customers and suppliers
- A restricted ability to use funds to innovate and stay ahead of competitors
- A threat to your business’s survival, especially if you can’t cover essential overheads
Knowing how to get funding for small business operations, then, is essential knowledge in today’s unpredictable economic climate.
Find out how you can do this in our all-in-one funding guide including:
- Can I get a traditional business loan in South Africa?
- How do I get funding for a small business in South Africa without a bank?
- How do I get startup funding for a small business?
- What are some alternative ways to get funding for an established business in South Africa?
Every business needs finance to succeed, including yours. Explore Lula’s alternative funding solutions today and find out how you can access small business funding that will take you to the next level.
Can I Still Get a Traditional Business Loan in South Africa?
Business funding in South Africa has changed over the years, but traditional small business loans from banks and credit unions remain an option for many entrepreneurs.
These lenders provide a familiar and reliable source of capital, including overdrafts, term loans, credit cards and equipment financing.
Yet a struggling economy has led to an extremely tight traditional lending market, with banks imposing very strict business loan requirements.
Many businesses, particularly small and micro enterprises that suffer from a 26% overall acceptance rate, find themselves frozen out from bank funding.
It’s got to the point where traditional financial institutions make up just 6% of the funding sources in South Africa, according to a 2024 report by Aspen Network of Development Entrepreneurs.
This disparity has created a funding gap that alternative lenders are aiming to fill as entrepreneurs seek ways to get funding for a small business.
How do I Get Funding for a Small Business in South Africa Without a Bank loan?
Many entrepreneurs find themselves researching, “How to get funding for a start-up business in South Africa”.
The good news is that more funding options than ever are emerging for aspiring businesses, a sea change from the formal lending market of years gone by.
“The South African market is very conservative to lending. A lot of the lending in the past was done mostly by the major banks. But what we’ve seen over time is a lot more fintech players now getting involved in lending,” says Ashley Naidoo, director of Kazang Pay in South Africa in a recent Forbes Africa white paper.
If you’ve just launched a business, or even if you just have a bright new idea, it’s possible to attract start-up investment from several sources in South Africa.
Here are some examples:
Crowdfunding
Crowdfunding is a digital potluck where entrepreneurs advertise their business ideas to a vast online audience in the hope of getting funding for a small business start-up.
People can then buy into the idea by contributing a small amount to fund the venture. This funding model has been behind major projects, many via the Kickstarter platform, which has raised over $8 billion (R138 billion) since its launch.
If an investor wishes to contribute a larger amount, then they may seek to use another crowdfunding model. Equity crowdfunding, for example, rewards contributors with a share of the business in exchange for money. There’s also rewards-based crowdfunding that offers perks or products to contributors in exchange for their support.
The downside of crowdfunding is that it tends to be restricted to ideas that fire people’s imagination, so more routine (yet still important) business ventures may find it hard to raise funds.
Angel investors
Angel investors are experienced entrepreneurs who are willing to invest their own money in promising start-ups.
They don’t just provide funds; they also offer invaluable mentorship, industry connections, and a belief in your vision.
A solid business plan, with goals, market analysis, and financial projections is key to attracting angel investments. Networking at industry events and practising your pitch there is also essential.
Once you’ve caught an angel investor‘s eye, they’ll conduct thorough due diligence to assess your business’s potential. A formal investment agreement is drawn up if both parties agree on the terms. This outlines the terms of the investment, including equity stake, valuation and governance rights.
Venture capital
Venture capital (VC) firms play a key role in funding start-ups, but they can also be a useful source of money if your business is still in its early stages. These specialised investors provide capital in exchange for equity in businesses.
They differ from angel investors in that they often have a more hands-on approach to investing thanks to their stake in the business. They also tend to have a longer investment horizon and are willing to wait for a return on investment.
VC firms typically focus on specific industries or market sectors, such as technology, healthcare or renewable energy. They invest in start-ups that demonstrate strong growth potential, innovative ideas and a capable management team.
Yet, like angel investors, VC investment targets new businesses, which means you are likely to be overlooked if you run an established enterprise.
South African government funding for SMEs
If your business doesn’t qualify for start-up funding, then there’s always South African government funding for small business start-up ventures.
Designed to stimulate economic growth, these loan and grant funding initiatives offer SMEs financial assistance, mentoring and business support across diverse sectors.
Small Enterprise Finance Agency (SEFA)
SEFA is a go-to source for financial products and services tailored for qualifying SMEs and cooperatives depending on their business needs. They offer loan products (including capital loans and equipment and property finance), equity investments and small business grants.
Wondering how to qualify for SEFA? Well, you need to tick just three boxes:
- Be registered in South Africa
- Have a sound business plan
- Meet specific industry and ownership requirements
Small Enterprise Development Agency (SEDA)
SEDA funding for small business offers non-financial services as well as funding including mentorship programmes, market access assistance and business plan development.
The Industrial Development Corporation (IDC)
This powerhouse focuses on industrial small business development, providing financing and support for projects in this sector. Department of Trade and Industry (DTI) funding for small businesses is another option for this type of enterprise.
The National Empowerment Fund (NEF)
Committed to fostering Broad-Based Black Economic Empowerment (BBBEE), the NEF offers funding and support specifically for black-owned businesses.
Support for Women
Several business funding options provide financial support for women-owned businesses, including:
- South African Women in Construction (SAWIC)
- Technology for Women in Business (TWIB)
- The DTI’s Gender and Women Empowerment Unit, through its South African Women Entrepreneurs’ Network (SAWEN).
These offer resources, networking and policy advocacy specifically for women business owners.
How to Apply for Government Funding for a Small Business
While a viable business finance option for many SMMEs, applying for government funding can be an uphill battle due to high competition.
It also often involves a lengthy process with detailed financial information, business projections and other necessary supporting documents. The process may take several weeks, which isn’t ideal if you have urgent expenses to cover.
What are Some Alternative Ways to Get Funding for an Established Business in South Africa?
Purchase order funding
Purchase order (PO) funding can be a financial lifeline for businesses that have secured orders, but lack the immediate capital to fulfill them.
Take the example of a small manufacturing company that has secured a large order from a major retailer. It may not be in a position to buy all the raw materials, pay labour costs, and cover operational expenses.
A PO funding solution gives you working capital by using the purchase order as surety. This cash injection will be enough to meet the order’s demands, maintain a positive cash flow, and build a strong relationship with the retailer.
Revolving Capital Facility
Life is unpredictable for SME owners in South Africa, which is why flexible small business funding makes so much sense.
Explore Lula’s Revolving Capital Facility
Unlike traditional business loans that bind you to rigid repayment schedules and fluctuating charges, with Lula’s Revolving Capital Facility you get access to a continuous line of capital to draw from as needed – with one clear, upfront fee.
You also get to steer clear of the tough lending criteria and slow approval process that plague bank and government finance.
How does Lula’s Revolving Capital Facility work?
The most successful businesses operate with confidence, and having a financial safety net plays a big part in this.
A Revolving Capital Facility lets you withdraw the funds to give you a soft landing, then lets you repay them once you start to generate revenue.
This means you can:
- Plan your finances with greater certainty, knowing you have a cash cushion if you need it.
- Avoid overborrowing (and the charges that come with it) by only withdrawing what you need.
- Zap energy into your cash flow by paying suppliers on time and qualifying for early payment discounts.
- Repay as you use, with none of those infuriating penalties for early repayment.
- Build a positive credit score by easily repaying your credit regularly.
How to Apply for Lula’s Revolving Capital Facility
Paperwork, business plans and credit reports are a thing of the past in the world of funding applications with Lula.
We look at alternative data sources, like digital transaction and point of sale (POS) data to build a more accurate picture of your business.
You can get approved and access funds within as little as 24 hours thanks to our lightning-quick application process.
Here’s how to apply for funding for a small business with Lula and unlock up to R5 million in funding:
1. Fill out our simple online application form in just eight minutes.
2. Get a funding decision within hours.
3. Get a personalised repayment plan that won’t change, no matter how much you borrow.
In a nutshell, you’ll get:
- Fast access to funding: Get approved and access funds within as little as 24hours.
- No penalties: Repay as you use, with no penalties for early-payment.
- No hidden fees: Enjoy affordable repayments with fixed fees that don’t change.
- Fixed terms: We believe in clear and transparent terms.
- Dedicated support: Our team is committed to helping you succeed.
By partnering with Lula, you get access to a financial solution that empowers you to seize funding opportunities, manage cash flow effectively and drive business growth.
Ready to unlock your business’s potential? Apply online for Lula’s Revolving Capital Facility today to access up to R5 million of funding within as little as 24 hours.
