Updated 14.10.2022

How to Get Startup Business Loans in South Africa

It’s easier to get into a business if you have money to start off, no matter how big or small it is. But what if you really don’t have the funding to make your business idea come true? Where do you go to fund your start-up business?

We’ll be answering these questions as you read on. But first, let’s define what exactly a start-up business loan is.

What is a start-up business loan?

Start-up business loans in South Africa pertains to the funding a business needs to get it operating from scratch. Start-up business finance also includes funding for mortgage payments, taxes, rentals, and employee payrolls.

A start-up business funding can be used to purchase equipment, office furniture, software installations, and initial supplies and inventory stock items. The money can also be used to obtain permits and business licenses.

Ways to get a start-up business funding

There are many ways to get start-up business loans in South Africa. Expect, though, that the loan application for start-up businesses will be tedious due to its high-risk nature.

# Debt financing

Banks and other financial institutions can provide this type of start-up business loan in South Africa. Just like any other loan, the money borrowed must be repaid in installments plus interest. The repayment period can be short-term, medium-term, or long-term, depending on your agreement with the lender.

Although most creditors require some form of security to be presented in exchange for the loan, there are still some who can provide start-up business loans with no need for a collateral.

Where to go to fund your start-up business?

Banks like Standard Bank offer start-up business funding to entrepreneurs who need it.

# Angel investment

Angel investors look for the next big thing from the pool of start-up companies that enter the industry. They’re willing to provide start-up businesses loans with no collateral by taking calculated risks in providing small amounts of money. They take part in funding companies in their early stages, expecting high returns within the next 5-10 years.

Angel investment is still a fairly new option for obtaining start-up business loans in South Africa. However, it’s starting to gain traction, especially with the rise of start-ups opening to help the economy overcome the financial obstacles it’s facing.

Where to go to fund your start-up business?

There’s Jozi AngelsNiveus, and the South African Business Angel Network (SABAN) who can help you get start-up business funding.

# Venture capital

This start-up business funding is often awarded to companies seen to have high growth potentials. Venture capitalists can provide seed funding or research funding that can catapult your business from the starting point. They can pour in large amounts of money if you win their confidence. With this, loan applications for start-up businesses are way tougher compared to other types of funding.

The fund provided by venture capitalists is an example of a start-up business loan offered without collateral. However, venture capitalists may require partial ownership rights to your business.

Where to go to fund your start-up business?

The South African Venture Capital Association (SAVCA) is a good starting point in looking for lenders who can provide start-up business loans with no collateral.

# Crowdfunding

Although very popular in other countries, this form of start-up business funding is yet to draw attention in South Africa. This type of funding platform allows you to raise money with the help of people who sympathize with your campaign goals. In exchange for their contributions, you offer them your products or services.

Where to go to fund your start-up business?

The most popular platform for crowdfunding in South Africa is the Angel Investment Network.

# Government grants and funding

The government of South Africa encourages people to put up their own businesses by offering start-up business loans and grants. They offer to fund those who are building their company from scratch and those who are established but are looking for extra money to expand their business.

Where to go to fund your start-up business?

As part of their commitment to helping entrepreneurs face the challenge of succeeding in their respective industries, the government has launched several programs to aid them:

Preparing to get funded

Before you proceed with your loan application for your start-up business, make sure you’ve completed the following actions first.

  • Prepared all the necessary documents like bank statements, tax returns, income statements, and other important files containing information on your financial situation.
  • Registered your company with the local government and have all the licenses and permits required to start your operations.
  • Checked your credit history, making sure you have an excellent personal credit score maintain to back your creditworthiness for getting a start-up business funding.
  • Created a detailed business plan on how to use the borrowed money to further your company’s growth.

Make sure you have tackled all these steps to avoid delays and hassles when you apply for a business loan.

As an additional tip, avoid getting start-up business loans requiring no credit check. They’re convenient to obtain but they may not be a good reflection of your credibility to take up a loan. To other creditors, this may look like you’re hiding something which makes them aversive to providing you additional loans in the future.

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MoneyToday South Africa is a financial website aims to assist consumers with comprehensive information on personal finance, loans, insurance, investment opportunities, financial guides, tips and comparison of a large number of finance and insurance companies on the South African market.


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