The Industrial Development Corporation (IDC) has been around since 1940 and is a national development finance institution belonging to the government and is designed to promote economic and industrial development.
The IDC achieves its goals by providing finance for industrial projects and promoting partnerships between and across industries within South Africa as well as across its borders.
Projects financed and facilitated include those that are high-impact and labour intensive, leading the creation and innovation of new industries, using diverse expertise to drive growth in priority sectors, and to take on higher-risk funding projects.
The IDC supports B-BBEEE and is actively involved in boosting and promoting black-owned and managed business and those with employment equity, by developing skills of black employees and business owners, by supporting government projects on local, regional, provincial and national levels, encouraging its stakeholders to comply with B-BBEEE policies, and encouraging the private sector to co-finance B-BBEEE transactions.
IDC Funding: Types of IDC funding available
These funds are aimed at supporting projects that will have high long-term impact on the economy through growth. Its aimed at bringing projects out of the informal sector and into the economic mainstream.
How to apply
Please find more information on these funds and links to the online application process here.
Agro-Processing Competitiveness Fund
This fund provides support and facilitates increased competitiveness, business growth, job creation and development in the agro-processing and beverages industries.
How to apply
For further information and a link for the online application process please visit here.
Through this scheme, over the next five years the IDC is investing R10 billion that will offer financial support to start-up businesses that includes funding for buildings, equipment, and working capital.
At the heart of this scheme is job creation through business that are: Green industries, agricultural value chain, manufacturing, clothing and textiles, footwear and leather, forestry, paper, pulp, furniture, chemical, pharmaceutical, plastics, mining value china, tourism and services, media and entertainment, and knowledge economy.
The Gro-E Scheme is aimed at start-up businesses and works by funding businesses with a minimum of R1 million to a maximum of R1 billion per project with interest of prime less 3% for loans and the Real After Tax Internal Rate of Return (RATIRR) of 5% for equity financing.
Funding is available over five years or until the scheme is exhausted.
How to apply
For more information on the Gro-E Scheme and to apply for funding continue to the website.
Product Process Development Scheme (PPD)
This is aimed at providing financial assistance to micro and small enterprises where total assets are below R5 million, annual turnover is less than R13 million, and the entity employs less than 50 people.
The fund is intended to promote innovation and technology development through financial assistance enabling the development of new products and/or processes.
How to apply
Risk Capital Facility Programme
Here, this fund provides risk finance to companies owned by previously disadvantaged individuals that show substantial job creation potential.
Funding can be provided through three channels: Direct channel operating alongside IDC’s mainstream business; through a niche fund channel; and third party channel.
How to apply
For more information on the Risk Capital Facility Programme continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.
Transformation and Entrepreneurship Scheme
This has been set up by the IDC to finance marginalised groups of South Africans such as women and the disabled.
This fund helps individuals gain access to finance that will develop and grow their businesses either as a start-up, or through expansion and/or acquisition.
This fund also provides mentorship and non-financial support such as business planning, training and mentorship.
How to apply
For more information on the Transformation and Entrepreneurship Scheme continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.
Related: NEF Funding
Green Energy Efficiency Fund
This fund is aimed at improving energy efficiency and helping South Africa transition to a low-carbon economy. It is intended to drive down energy related costs, improve production capacity, operational effectiveness and competitiveness – thus aiding in job creation.
How to apply
For more information on the Green Energy Efficiency Fund continue to the website here, to apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.
Women Entrepreneurial Fund
As the name suggests, this fund is aimed at improving entrepreneurial participation by women.
Funds will only be given to businesses with a minimum 50% shareholding by women and where women are involved in operations and management, and where funds are needed for start-up or expansion.
Funds are provided for businesses with a total asset base of less than R80 million and a maximum provision of finance is R30 million per transaction.
How to apply
To apply for funding please visit their website http://www.idc.co.za/, click on “Online Funding” and follow the prompts.
This fund is designed to assist small and medium businesses negatively affected by the global recession.
The main objective of this fund is to keep businesses open, stem job losses and maintain a productive economy.
The fund helps by building capacity in existing business – thereby creating jobs – as well as providing for working capital, operational and capital expenses, and assisting in competitiveness.
How to apply
The Manufacturing Competitiveness Enhancement Programme (MCEP)
This is a new suite of incentives aimed at existing manufacturers that is designed to promote competitiveness in the industry as well as ensure job retention. It consists of industrial financing loan facilities and production incentive grants.
How to apply
For more information on the The Manufacturing Competitiveness Enhancement Programme (MCEP) and to apply for funding continue to the website.
How to access IDC Funding
The IDC assesses applications for funding based on (but not exclusively) job creation potential, rural development, urban renewal and poverty alleviation, the employment of women and youth, as well as skills development.
Related: New Ways SMEs Can Find Funding
All projects funded must show economic viability and sustainability and should target previously disadvantaged groups, women, people with disabilities, low income working groups, and marginalised communities.
Contact details for IDC funding
The Definitive List Of South African Business Incubators For Start-Ups
Are you looking for an incubator to ensure the sustainability of your start-up? This comprehensive list of South African incubators will set you in the right direction.
70-80% of small businesses don’t survive their first year, says Proudly South African CEO, Eustace Mashimbye, with only 9% surviving 10 years. Incubators were developed to reduce the chances of failure of start-ups by offering sustainable and fundamental entrepreneurial support.
Incubators enable entrepreneurs and innovators to find the necessary support and resources to build and maintain a successful start-up. An incubator can offer you:
- A creative space to work out and discuss every aspect of your business
- More resources and experience than you have when starting out
- The opportunity to develop a network of other entrepreneurs and start-ups to sustain your business in the future.
“Getting involved with an incubator requires more than simply filling out an application. You need to get clear about which type of incubator would be the best fit. One of the most damaging mistakes a brand-new company can make is choosing one that doesn’t thoroughly meet its needs,” explains Nav Athwal, founder and CEO of RealtyShares.
Here are 58 South African business incubators for start-ups and what they can offer you:
- Global Cleantech Innovation Programme for SMEs
- Red Bull Amaphiko Academy
- Aurik Business Accelerator
- Transnet Enterprise Development Hub
- The Techstars Foundation
- Anglo’s Zimele
- Shanduka Black Umbrellas
- SEDA Ekurhuleni Base Metals Incubation Programme
- Silulo Business Incubator
- Maxum Business Incubators
- Mpumalanga Stainless Initiative
- Edge Growth
- Timbali Technology Incubator
- New Ventures Studio
- Thomson Reuters Labs
- Seda Automotive Technology Centre
- Meltwater Entrepreneurial School of Technology
- Seda – Agricultural & Mining Tooling Incubator
- Spark* South Africa
- Garden Route ICT Incubator
- The Khayelitsha Bandwidth Barn
- Biofuels Business Incubator
- French Tech
- BioPark Business Incubator
- The Founder Institute
- Seda NMB ICT Incubator
- Tshimologong Precinct
- Softstart BTI
- African Rose
- The Grindstone Accelerator
- Riversands Incubation Hub
- mLab Southern Africa
- South African Renewable Energy Business Incubator
- Enterprise Elevator
- The Cape Innovation and Technology Initiative
- The Awethu Project
- The Creative Counsel incubator programme
- Green Pioneer Accelerator
Investment Support For Black Business
Business development services to improve core competencies, managerial capabilities and competitiveness.
The department of trade and industry’s Black Business Supplier Development Programme is a cost-sharing grant, which offers support to black-owned enterprises in South Africa. The DTI contributes 90% of the cost of a project and the applicant 10%.
The programme aims to fast-track existing SMMEs that exhibit good potential for growth, grow black-owned enterprises by fostering linkages between black SMMEs and corporate and public sector enterprises, complement current affirmative procurement and outsourcing initiatives of corporate and public sector enterprises, and enhance the capacity of grant recipient enterprises to successfully compete for corporate and public sector tenders and outsourcing opportunities.
The business must be majority black-owned (50 plus one share) and have a significant representation of black managers on the management team. The maximum annual turnover is R12 million per annum, and the business must have a trading history of least one year. Businesses can qualify for a grant to the maximum amount of R100 000. The requested amount should not exceed 25% of the entity’s previous year’s turnover.
Applications must include a detailed business plan, financial statements, turnover projections and a tax clearance certificate.
Go to www.dti.gov.za
Expansion Funding Options For Your Growing Business
Growth can put an enormous strain on the cash flow of your business. Luckily, there are financing options available to you if you know where to look, enabling you to keep that growth on track.
One of the first things you notice when your business starts to grow is that your costs shoot up, while your profit doesn’t immediately follow. Growth can put an enormous strain on the cash flow of a company and business owners often make the mistake of financing growth from their cash flow — which is like using your credit card to finance your home renovations.
Doing things this way results in unnecessarily high financing rates and challenging repayment terms, which can also leave you vulnerable to a sudden cash flow crisis without the time required to line up financing.
Financing business expansion requires planning, especially for fast growing companies.
When planning for fund raising, consider applying for sufficient funds to cover the cost of existing debt and the cost of the expansion. When it comes to business expansion funding, the total amount of the finance required will determine which finance options are most suitable.
If your finance requirements are relatively low and your cash flow history is good, consider a term loan or business overdraft to fund your growth while you work on increasing your sales to meet your growth expenses. If your expansion needs include additional equipment or machinery, asset finance is available.
However, if your SME is growing rapidly and you want to enter new markets, scale your team or undertake new product development, look at longer term funding solutions. Equity finance is the most common option for this kind of funding requirement and there are also government funds that cater for business expansion.
Government lending agencies provide a range of finance options for SMEs to foster growth in high priority sectors, specific geographic areas and to promote economic inclusion for previously disadvantaged people. The finance options include incentivised financing, cost sharing options, equity, loans and grants.
Government has partnered with Finfind, which has an up-to-date database of all the government funding offerings available to SMEs.
If your business profile or funding need matches any of the government funds, Finfind will match you with the offering and provide you with the details of what is required to apply.
Equity finance refers to the sale of a percentage of ownership in your company in return for business expansion funds. One of the biggest benefits is that these lenders are often prepared to fund businesses that are not currently profitable, but have the potential to generate large returns. As equity funders take more risk than traditional financiers, they expect a higher rate of return on their investment from businesses that can scale into large markets and show highly profitable future returns.
In the SME market, early-stage equity finance is usually provided by venture capital companies (VC), while mid-stage or larger expansion funding requirements for medium size enterprises are provided by private equity funds or bank loans. VCs look for businesses with a strong founder, that have proven product market fit, a team to execute the business plan and a robust business model showing strong future returns. Funding amounts usually vary from R1 million to R20 million.
What Funders Want
Funding applications require preparation, including a detailed business model that outlines expansion plans and makes a compelling case for investment.
CVs of key staff will be important as well as an organogram that shows the impact of the expansion on your team, detailed projected income and expenses, historical, audited financial statements, bank statements for the business’s bank account/s, tax clearance certificate, and personal statements of assets and liabilities for all owners as well as company and tax registration documentation. Keep an electronic folder with this documentation and update it monthly so that you can access it whenever it is needed.
If the initial funding meetings go well, the potential funder will perform a due diligence where the financials, the business model and its assumptions and projections will be scrutinised. They may interview some customers and your key staff members. Funders are especially interested in the founder and team running the business, as they are responsible for ensuring that the projected growth is realised. They look for experience, deep knowledge of the industry and operational competence.
Finfind is SA’s leading access to finance solutions for SMEs. This revolutionary online platform links finance seekers with matching lenders, providing easy access to over 200 lenders and over 350 loan options. Finfind is supported by USAID and sponsored by the Department of Small Business Development.
Go to www.finfindeasy.co.za to find the business finance you need. It’s free and easy to use.
- Do your homework: Each equity fund has a clear investment strategy. Familiarise yourself before engaging.
- Educate yourself: Get to know the equity finance terminology and what to expect during the various stages of the deal process.
- Develop an exit strategy: This is a common question and an important issue for funders.
- Consider alternative funding: Can your expansion be funded with alternative or cheaper sources of finance that do not require giving up shares? Keep in mind, though, that the right investors bring more than money. They provide expertise and access to networks that can expedite your expansion plans.
Lastly, while you don’t always get the luxury of choice, do your best to partner with people you will enjoy working with, it can be a long marriage.
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