Now, I know some of you might be thinking, “Business funding? Whatever. I can bootstrap my way to success!” And hey, that might work for some lucky folks out there. But let’s be real, starting or growing a business takes more than just a bright idea and a can-do attitude. It takes money – and lots of it.
From networking opportunities to mentorship programs, the right funding can give you the support and guidance you need to grow your business sustainably. Plus, having a solid funding plan in place can give you the peace of mind to focus on what you do best – running your business.
So, if you’re serious about taking your business to the next level, it’s time to start thinking about what kind of funding floats your business boat. In this blog, we’ll uncover how different types of business funding work and the pros and cons they come with.
What is Public Business Funding and How Does It Work?
Public business funding, also known as government funding, is financing the government offers to help businesses achieve their goals. This type of funding is usually provided through grants, loans, or tax incentives.
One of the most significant advantages of public business funding is that it can be more accessible than other forms of financing, particularly for businesses that might not have a solid credit history or collateral. Additionally, government funding often comes with favourable terms and conditions, such as low-interest rates and extended repayment periods.
However, securing public funding can be a bit more complicated than getting a loan from a bank or finding investors. Businesses need to research and identify the available funding programs and then submit a detailed application outlining their project and how it aligns with the objectives of the funding program.
Types of public business funding available in South Africa
- Small Enterprise Finance Agency (SEFA) Funding: SEFA offers various types of funding, including working capital, asset finance, and term loans. These funds are available to small and medium-sized enterprises (SMEs) in various sectors.
- Industrial Development Corporation (IDC) Funding: IDC offers various funding programs, including business loans, equity finance, and project development finance. They support businesses in several sectors, including agro-processing, mining, and manufacturing.
- National Empowerment Fund (NEF) Funding: NEF funds businesses that promote economic transformation and job creation. Their funding options include start-up finance, expansion finance, and capital markets development.
- Technology Innovation Agency (TIA) Funding: TIA provides funding to entrepreneurs and innovators in various sectors, including health, energy, and agriculture. Their funding options include seed funding, early-stage financing, and commercialisation support.
- Black Business Supplier Development Programme (BBSDP) Funding: BBSDP supports black-owned and managed businesses through a grant funding programme. Their funding aims to improve competitiveness, sustainability, and growth of businesses.
What is Private Business Funding and How Does It Work?
Private business funding refers to financing obtained from non-governmental sources, such as investors, banks, and other financial institutions. Unlike public funding, private financing is usually provided by individuals or organisations seeking to profit from their investments.
Private funding can be more flexible than public funding, with fewer restrictions on how the funds can be used. However, it also comes with its own set of challenges. Investors may require significant ownership in the company or a say in how the business is run. Private funding may also be more expensive, with higher interest rates or equity stakes.
Types of private business funding available in South Africa
- Venture Capital Funding: Large investments in high-growth companies with significant potential for returns. Investors typically take a significant equity stake in the business.
- Angel Investing: Smaller investments made by high-net-worth individuals or groups in exchange for equity in the business. Angel investing is ideal for early-stage companies.
- Private Equity Funding: Investments in established businesses with a proven track record of profitability. Private equity firms acquire a significant ownership stake and work closely with management to improve operations and increase profits.
- Crowdfunding: Raising small amounts of money from a large number of people through online platforms. Crowdfunding is an excellent option for businesses looking to test the market for a new product or service or raise capital from a broad base of supporters.
- Business Loans: Borrowing a fixed amount of money at a fixed interest rate from banks or other financial institutions. Business loans are ideal for established businesses looking to finance specific projects or initiatives.
Last but Not Least, Stopgap Funding: By Payflex and Merchant Capital
Merchant capital, an award-winning finance service, has partnered with Payflex to bring you flexiadvance. The aim is to provide private business funding for small businesses, in particular, with transparent, personalised and fast-turnaround support. When you qualify for flexiadvance, you can get the funding you need in less than 24 hours with flexible repayment solutions.
So, how do you qualify?
Great question! Here’s how you get on the train:
- You must be a South African citizen with a guarantor.
- Your business must have a minimum of R80,000 in card sales or R150,000 in EFT transactions per month.
- Your business must have been trading for at least 12 months.
- To access Payflex business funding, you must be an existing Payflex merchant.
Furthermore, your sign-up is fully digital, with not a single piece of paperwork required! The costs are fixed, which means there are zero hidden fees, as with many other types of funding.
Which Business Funding Model Best Suits You?
In today’s fast-paced business world, securing funding can be a critical factor in the success of your venture. But with so many options available, choosing a suitable funding model can be tricky. Whether you choose public, private funding or stopgap funding like flexiadvance for your small business needs, it’s essential to do your research and understand the requirements and criteria for each option.
So consider your business needs and financial goals, make informed decisions, and of course, keep running that business like a sports team! We wish you all the best in your new venture.