Business finance options in South Africa

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Either than the obvious of loaning money for your business through a bank there are other business finance options in South Africa (SA). Here are a few.  

Alternative lenders  

Provide small business loan. Micro lenders work differently than banks offering smaller loan sizes. They usually require less documentation than banks, and often apply more flexible underwriting criteria. There are a few hundred alternative lenders throughout SA. Microloans are really for that startup entrepreneur or an entrepreneur in an existing business facing a capital gap and needs to secure capital for new equipment.  

Asset Finance Houses 

It’s for if you’ve business or personal asset to place as security. Asset Finance Houses are companies that are actually part of the big four banks’ groups. Bankfin is part of Absa while WesBank is part of FNB. Stannic belongs to Standard Bank. 

Asset finance houses are more flexible when it comes to extending loans to businesses. You stand much better chances when working with them. One of the reasons for this is that the loans are usually smaller. More importantly, since the funds are used for the purchase of an asset, the asset is often part of the collateral, which is security that the lender requires you’ll repay your debt. 

This makes the risk for the lender lower because if you fail to repay the loan, the lender will have the right to repossess the asset. The value of the collateral must correspond to the level of risk which the lender assumes.   

Then there’s also Angel Investors  

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 extremely high risk, and a very high return on investment is normally required. 

Or try government loan programmes  

As an alternative to bank funding. The difference is that interest rates are much lower and repayment terms longer or more flexible. Although government loans can be a cost-effective means to get the funds you need, be prepared for a lot of paperwork, strict selection criteria, and a very long wait.

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