Here are SME minister’s new measures to boost small business finance

The Minister of Small Business Development Khumbudzo Ntshavheni last week announced new measures to make funding more accessible and affordable to small businesses.

Speaking at the Ekurhuleni TVET college’s Centre for Entrepreneurship and Rapid Incubation last Thursday (14 November), Ntshavheni outlined a number of measures to boost funding to small businesses.

The new measures include:

1. Funding available through more centres

Business support services from the Small Enterprise Development Agency (Seda) and funding from the Small Enterprise Finance Agency (Sefa) will now be available through all Seda incubators and Local Economic Development (LED) units of municipalities.

The Small Enterprise Development Agency (Sefa) has set new turnaround times in which to approve funding

The incubators and LED units will be supported by the various Sefa and Seda regional offices. Sefa currently has 82 offices across the districts.

In addition, business owners can apply for funding from Sefa online, at www.sefa.org.za.

2. New Sefa funding turnaround times

Ntshavheni said Sefa has started to improve on the time it takes to make and communicate funding decisions.

For online applications, an applicant is guaranteed to receive feedback on the completeness of their application
within two days of submitting the form. With hand delivered applications applicants should get immediate feedback.

Sefa is implementing a 20-day turnaround time on bridging finance and 30-day turnaround on term loans from the date of receipt of an application, to the date of communicating a funding or non-funding decision to the applicant.

The goal of the department is to have Sefa implement turnaround times of five days on bridging finance and 10 days on term loans within the next three years.

3. Common templates for funding applications

To ensure that business owners don’t have to rely on consultants to complete applications for funding, Sefa will adopt common templates used by the National Empowerment Fund (NEF), the Industrial Development Corporation (IDC) and the Land Bank.

Ntshavheni said Seda, Sefa and the NEF will start to use the common template, while the Land Bank and IDC are finalising their processes to adopt the common template as it related to small business funding.

She said the department believes the adoption of common templates for funding applications by development finance institutions will improve access to funding and lesson the burden of doing business for small firms.

4. Small Business Innovation Fund

In July Ntshavheni announced that small businesses will have access to a mixture of grants and loans from Sefa — through a new blended finance model fund that aims to finance 100 000 young entrepreneurs. The aim is to lower the cost of finance.

Small businesses, startups and innovators will be able to access matched grant funding with a repayable Sefa loan, through the Small Business and Innovation Fund (SBIF) (see this story).

The fund is run jointly by the departments of small business development and science and technology and administered by Sefa.

In July Ntshavheni said the grant portion will be up to a maximum of R2.5-million per enterprise .

To access Sefa’s Blended Finance Programme an entrepreneurs must be no older than 40 years old, while their small business must be able to create or maintain a minimum of 10 jobs — with these jobs remaining in existence for a continuous period.

A range of financial instruments will include debt, quasi-equity, mezzanine and a combination with conditional grants.

5. Partner organisation to get funding

The SBIF makes provision to fund partners such as incubators. To get funding these partner organisations must have a minimum of three years’ relevant track record and demonstrate the ability to leverage additional funds from private funders.

Furthermore, such organisations must have systems, processes and credible loan administration system in
place with a solid pipeline of small businesses.

The funding must also meet developmental impact targets and comply with Seda general guidelines and standards for incubators and enterprise development.

Funding targets

Sefa has commenced the approval of applications for funding with the target to approve R450-million on the SBIF and R560-million across the other Sefa funding instruments by next month, which will cumulatively amount to R1-billion approvals and at least 70% disbursements.

To date, SBIF approvals sit at R100-million covering the provinces of the Eastern Cape, KwaZulu-Natal and the Western Cape and targeting to create or maintain 7517 jobs.

Ntshavheni said total Sefa allocations including the SBIF are expected to cumulatively amount to R11.5-billion over five years and fund 590 000 small businesses and maintain or create 665 000 over the same period.

She said the department plans to leverage an additional R10-billion over the five years, which should enable these small firms to maintain or create at least a million jobs.

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Featured image: Minister of Small Business Development Khumbudzo Ntshavheni (GovernmentZA via Flickr)