Entrepreneurs with a great idea for a business, but no money to put their plan into practice, know how hard it is to raise enough cash to get started.
Yet such enterprises hold the potential to create jobs that will uplift families or entire communities, so it is crucial that anyone with a workable business plan has the chance to turn it into reality.
Yet such enterprises hold the potential to create jobs that will uplift families or entire communities, so it is crucial that anyone with a workable business plan has the chance to turn it into reality.
Fortunately, they can turn to the Small Enterprise Finance Agency (Sefa), an organisation that exists to fund and nurture Small, Micro and Medium-sized Enterprises (SMMEs).
Already an astonishing 46,000 entrepreneurs have benefitted from Sefa’s backing, gaining not only a financial kick-start, but also mentoring and financial guidance to make sure that their loan is used wisely.
CEO Thakhani Makhuvha is proud to say that Sefa is willing to give people a chance when banks and other institutions won’t take the gamble. “Our appetite for risk is very high,” he says. “Typically, we support businesses we believe are sustainable, and we fund clients that are high risk because the banks won’t touch them. That said, we are not reckless with our loans.”The interest rate drops if the clients meet certain criteria, and enterprises are given more favourable rates if they are black-owned, run by women, young people, those with disabilities, or people based in rural areas. Often these clients have innovative ideas, but face severe difficulties because of prejudices or economic hardship. Sefa also cuts the interest rate when a business begins to create employment.
The organisation was set up in April 2012 under the Industrial Development Corporation (IDC) to help alleviate poverty and boost job creation by providing loans of between R50,000 and R5 million.
The loans must be paid back with interest, because Sefa uses its profits to support other upcoming businesses.
“We provide access to finance and other support if you want to start or grow a business,” Makhuvha says. The additional support comes in the form of mentoring from the Institute of Business Advisors, as well as financial advice from the South African Institute of Chartered Accountants.
To ensure that the people who need its support the most get to hear about it, Sefa runs road shows throughout the country to share information with potential entrepreneurs. It also advertises on community radio shows and billboards in target areas, and has branches where people can get information or make an application in every province.
In its first year, Sefa approved loans totalling R440 million and more than doubled that to R1,1 billion last year. It has supported ventures as diverse as funeral parlours, potato chip makers and open cast mining.
Makhuvha says that it is too soon to say how many of these businesses will remain sustainable, since start-ups have a notoriously high failure rate. Some companies are struggling with the repayments, often because they have trouble getting paid by their own clients, he says. In such cases the loan repayments can be restructured or extended, or more mentoring given to keep South Africa’s essential entrepreneurs afloat.
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