Calling all young Entrepreneurs
According to a recent report by the Global Entrepreneurship Monitor (GEM), South Africa scores poorly when benchmarked against youth entrepreneurship in fellow BRICs countries. The report states that only 7% of South Africans between the ages of 18-24 and 10% between the ages of 25-34 start their own businesses.
One of the leading causes of the culling of entrepreneurial spirit amongst the youth remains access to finance; however there are a number of entities that are willing and able to finance youth ventures.
Here are a few establishments, which could assist you in strutting down the path to business success.
Content in this guide
- National Youth Development Agency (NYDA)
- Gro-E Youth Scheme
- The Youth Entrepreneurship Fund (YEF)
- Umsobomvu Youth Fund
- Free Mentorship Programme: The Mara Foundation
- Mentorship Programme by Application: Bizco Business Consulting
- Acceleration Programme: New Ventures Studio
- Free online courses for young entrepreneurs
Grants and Funding
National Youth Development Agency (NYDA)
This government grant aims to supply funding to the youth of South Africa, and is currently broadening its offering by creating mentorship and development programmes.
Types of NYDA Funding
NYDA awards grants to both formal and informal businesses that are in the start-up or development phases. These government grants are also awarded to co-operatives; an autonomous association of people united to meet common economic and social goals through a jointly owned and democratically controlled enterprise. Additionally, the NYDA awards grants to youth that are actively involved in community development and facilitation projects.
Do You Qualify for NYDA funding?
- You need to be eighteen years old at the time of application.
- The grant needs to be for business start-up or growth.
- You need to be between the ages of 18-35 years with the necessary skills and experience, or display the potential skill appropriate for the enterprise.
- Only South African citizens residing within the borders of South Africa are eligible.
- You will need to be part of the day-to-day operation and the management of your business.
- Require a grant from NYDA of not less than R1 000 and not more than R100 000.
Once you’ve received the grant, if you’re still employed full-time, you might need to resign and present your grant officer with proof of resignation. This is a requirement of the grant because the NYDA requires you to focus completely on your venture and not split your focus with other obligations, such as a full time job.
How to Apply for NYDA Funding
Entrepreneurs or co-operatives that meet the following criteria are eligible for NYDA government grants:
- Applicants must be between 18 to 35 years old. They must also have the necessary skills and experience or show the potential skills for the business and industry in which they wish to operate.
- Applicants must be South African citizens with ID documents and operate their business within South Africa.
- The applicant must need the grant to start or grow their business. The applicant must not need the grant as any other source of capital.
- Applicants must involve themselves in the operation and management of the business on a day to day basis and must work on their venture full-time.
- The business may be formal or informal, and categorised as a micro-enterprise.
- The company must show potential to be commercially viable and sustainable.
- Applicants should be sole traders or in the case of groups have a minimum of five people.
Contact Details for NYDA Funding
- Number: 0800 52 52 52
- Website: www.nyda.gov.za
Read more about NYDA funding.
Gro-E Youth Scheme
The Gro-E Youth Scheme offers both financial and non-financial support to youth initiatives. The aim of this scheme is to help young entrepreneurs contribute towards sustainable job creation. R1 billion has been set aside to assist with funding of businesses owned by individuals, under 35 years old.
This scheme provides loans at prime less 3% to enterprises that operate in the industries that fall within its mandate and aims to create new jobs for South Africans. Only South African citizens or permanent residents are eligible for funding.
Do You Qualify for Gro-E Youth Scheme funding?
- A least 50% of the ownership needs to be by an individual under the age of 35.
- Your business needs to be a start-up and the funding can go towards purchasing a building, machinery or working capital.
- Your intention could also be to expand your existing business.
- A business that demonstrates economic merit and has prospects of suitable profitability to be able to facilitate their funding obligation.
- While the business is within the funding period, the cost per job cannot exceed R500 000 relative to the total funding required.
- Broad-Based Black Economic Empowerment certification from an accredited verification agency, where applicable.
- Ventures that are operating or expanding within South Africa.
- Your funding period will need structure in order to meet the cash flow needs of your business.
- Appropriate capital and interest payment holidays are a requirement that you must apply depending on the financial needs of your specific business.
- There is no prescribed minimum for owner contribution.
In order to support the government’s New Growth Path (NGP) and Industrial Policy Action Plan (IPAP), businesses in the following sectors can apply for funding:
1. Green industry
- Renewable energy
- Energy efficiency
- Pollution mitigation
- Waste management and recycling.
2. Agricultural value chain
3. Manufacturing activities
- Advanced manufacturing
- Automotive, components, medium and heavy commercial vehicles manufacturing
- Clothing, textiles and footwear, and leather
- Forestry, paper and pulp, and furniture
- Fabrication, capital and transport equipment
- Plastics and chemicals.
4. Strategic high-impact projects
- Industrial infrastructure
- High-impact cross-sector projects.
5. Mining value chain
- Downstream mineral beneficiation
- Mining technologies.
6. Tourism and high-level services
- Business process services
7. Media and motion pictures
- Motion pictures production
- Media value chain – broadcasting (radio and television)
- Media expansion – including new media
- Film production and animation.
8. Knowledge economy
How Does Gro-E Youth Scheme Work?
- Funding is at prime less 3%, to businesses that will create jobs.
- A maximum of R50 million per project is available.
- The funding will be available over a five-year period or until the scheme depletes, whichever occurs first.
- You will need to use your funds within one year from the approval of funding. If you miss this deadline, pricing reverts back to normal IDC pricing.
- Reduced loan pricing will be available for five years, after which normal IDC pricing will apply.
- If you require finances in excess of the scheme’s limit you can access more capital through traditional IDC funding.
- Pre- and post-investment support and mentorship is available where needed.
Gro-E Youth Scheme offers programmes that provide non-financial support for entrepreneurs. This backing is available during pre- and post-approval stages. The support also includes services such as assistance to distressed clients.
Contact Details for Gro-E Youth Scheme Funding
Call Centre on 086 069 3888 or email email@example.com.
The Youth Entrepreneurship Fund (YEF)
The Youth Entrepreneurship Fund aims to promote businesses led by youth. The fund aims to achieve this by providing grant funding and business development programmes. Youth pay in a commitment fee for the assistance package that suits their needs.
Do You Qualify for Youth Entrepreneurship Funding?
This fund is open to all South Africans irrespective of race or gender, who are still in or outside of the schooling system. Candidates need to be within the ages of 18-35. There is encouragement of black youth to actively partake in this opportunity to create businesses. The fund also encourages parents, guardians and corporates to invest on behalf of the youth to create wealth.
How to Apply for Youth Entrepreneurship Funding
Starting a business is not a single moment but a process and there are no shortcuts. As a result of this, YEF places a priority on training, mentorship and business coaching.
This is the process leading up to its grant disbursement:
First you chose the package that you need and complete the necessary documentation online.
Second, the business validation process starts. Included in the validation processes are the assessment of your business, guidance and the refinement of your business plan. There is an emphasis placed on business validation, which means your business will need to be innovative and commercially viable. Existing businesses should display the potential of being scalable.
Third, once they’ve evaluated your business for market readiness, the dispersal of the grant will begin. You can only use the grant for the business and nothing else.
Fourth, to ensure the success of your business, mentors will guide you in the process of building your business. Numerous platforms can ensure that your business receives as much support as it needs, both physically and virtually.
What are the Required Contributions and Benefits?
The YEF have created two types of support for youth-led business. This includes financial and non-financial support. The financial support comes in three packages depending on what your business requires. Each package has a corresponding fee structure, as follows:
- Silver: R166 over a 12-month period = R2 000
- Gold: R333 over a 12-month period = R4 000
- Platinum: R500 over a 12-month period = R6 000
Its non-financial support is equally as important, therefore the YEF pays particular attention to this element of business. A reputable academic institute will offer you non-financial intervention, and a network of mentors. These mentors all boast core competencies in the realm of business development.
Contact Details for the Youth Entrepreneurship Fund
- Office Address: 1st Floor, Block C4, 150 Rivonia Road, Morningside, Sandton
- Email address: firstname.lastname@example.org
- Office Number: (010) 001 6170
- Call Centre Number: (010) 001 6171
- Website: yef.co.za
Umsobomvu Youth Fund (UYF)
Umsobomvu Youth Fund is a government initiative that creates opportunities for South African youth in entrepreneurship and the creation of new jobs. This voucher programme is not a loan programme. The voucher programme provides support services to both new and existing youth-run businesses.
Do You Qualify for Umsobomvu Youth Funding?
You will need to adhere to the following requirements:
- Males between 18-35 years of age
- Females 18-65 years of age
- Unemployed graduates
- Rural and urban youth
- Youth in conflict with the law
- Previously disadvantaged individuals (PDI’s) – 90%
- Only South African citizens are eligible
- Non previous disadvantaged individuals – 10%.
Your business should also be within the following sectors:
- Information Communication Technology (ICT)
How Does the Umsobomvu Youth Fund Work?
The voucher programme provides support in the following areas:
- Bookkeeping – once off clean-up
- Business plan development
- Business and financial administration
- Due diligence
- Legal services
- Marketing planning
- Tender application support
- Web-based marketing
- Branding and design of business forms
- CC and PTY registrations.
Contact Details for the Umsobomvu Youth Fund
Every Wednesday morning at 10:15am, a UYF Information Session transpires and after this session you will receive an application form that will allow you to apply for support services.
For general queries you can also visit its headquarters at The Business Place, 7 Anton Anreith Arcade, 1st Floor, Cape Town on weekdays between 09:00 to 16:30 or call +27 (0) 21 425 7816/7/8/9.
Resource: How to Write a Funding Proposal
Free mentorship programmes
The youth of South Africa are on the back foot with regards to access to education. According to the Institute for Justice and Reconciliation report, young people tend to lack the skills or experience to navigate the business world.
How can unskilled and inexperienced youth create a successful long-lasting business venture? The UYF’s solution to this problem includes: Mentorship programmes, online courses and accelerator programmes.
Free Mentorship Programme: The Mara Foundation
The Mara foundation is offering a free online mentoring platform, called Mara Mentors. This mentoring programme allows ambitious entrepreneurs and global business leaders to connect, while business experts can engage with entrepreneurs via the Mara Mentors web-based platform and mobile application.
Mara Mentor enables ambitious and aspiring entrepreneurs to connect with international peers and business leaders. This platform aims to empower entrepreneurs through the provision of resources that comprise of:
- Discussions and debate forums
- Industry news and updates
- The knowledge of world class mentors.
Entrepreneurs gain encouragement, support, guidance and vital feedback that will help you to evolve your business idea and plan.
Contact Details for The Mara Foundation:
Mentorship Programme by Application: Bizco Business Consulting
Bizco Business Consulting (BBC) offers a consulting programme that is unique and allows it to work exclusively with a limited number of start-up companies on a one-on-one basis. BBC expects a commitment from entrepreneurs of at least three months, as it is extremely selective and the programme is highly intensive.
Do You Qualify for Bizco Business Consulting’s Mentorship Programme?
- You must be a South African Citizen over the age of 18.
- Only applications from individuals.
- There is no fee to submit an application.
- Only online, electronic, applications accepted.
Contact Details for the Bizco Business Consulting:
- Number: 086 123 7775
- Website: bizco.co.za
Related: Have a Mentor in Your Back Pocket
Acceleration Programme: New Ventures Studio
Accelerator programmes aim to jumpstart businesses. You will increase your chances of raising venture capital from a third-party after graduating from the programme. Mentorship, is another advantage of an accelerator, as you’ll be in contact with other entrepreneurs working within the accelerator.
New Ventures Studio is a platform for young (16-35) individuals, aimed at those who are working towards being successful entrepreneurs. It specifically focuses on those who have realised the importance of upskilling themselves before trying to navigate unfamiliar territory in entrepreneurship.
The programme is an eight-week long insightful course and the five individuals who successfully complete it join the incubator.
You do not need to have a business in order to apply for this opportunity and each of the 20 successful applicants will receive a R35 000 scholarship to attend the eight-week entrepreneurship course.
By taking advantage of the various funds and incubator programmes on offer, young entrepreneurs are able to realise their goals faster, and more efficiently. However, acquiring funding and being part of a mentorship programme isn’t enough to excel in your sector. The programmes highlighted here serve to motivate and drive entrepreneurs to explore new skillsets, push proverbial boundaries and empower people around them by offering employment opportunities and the prospect of a better life.
Contact Details for New Ventures Studio:
Free online courses for young entrepreneurs
Education doesn’t always have to cost you a fortune; you can now undertake courses from leading academic institutions in the comfort of your own home, for free. From these online courses you can learn about business and starting up.
The courses offer self-paced modules, which means you can do it when your diary accommodates; either four, six, eight, 12 or 20 week periods.
Here are four online course platforms that you and any other entrepreneurs can benefit from:
This platform can teach you key tools and steps to building a successful start-up. It has a comprehensive course on acquiring the knowledge and skills necessary to see your business grow towards its next milestone.
This platform has an emphasis on tech-based courses including:
Visit www.udacity.com for other course options.
With this platform you get the added benefit of learning all the content you can for free. This site offers a variety of courses that you will need to establish and grow your business, such as:
- Business and Financial Modeling Specialisation
- Introduction to Corporate Finance
- Innovation for Entrepreneurs: From Idea to Marketplace
- An introduction to operations management
- Business strategy
- International leadership and organisational behaviour
- Smart growth in private businesses
- Engaging your audience.
Visit www.coursera.org for other course options.
edX offers free online courses from the world’s best universities including Harvard, MIT, UC Berkeley, Microsoft and The Smithsonian. Some examples of what this platform has to offer are:
- DO Your Venture: Entrepreneurship for Everyone
- Who is your customer?
- Building mobile experiences
- An introduction to credit risk management.
Visit www.edx.org for other course options.
Explore a wide range of business skills from project management and negotiation to leadership skills and online marketing strategy. lynda.com’s Professional development tutorials can help you learn SEO, spreadsheets, word processing, including:
- SEO fundamentals
- Online marketing essentials
- Human Resources
- Time Management
- Cross-cultured Intelligence.
Visit www.lynda.com for other course options.
What Can A Business Loan Be Used For?
Read on below for what you can use these loans for.
Sometimes in the business world, you might need a financial helping hand. This is especially true if you are starting out as a business owner or building your business from where it already is. This is where business finance can be highly useful because you can use it for any number of issues that your business might be facing.
When you apply for any business loans you should know what you want to use the money for. For example, asset financing is used to lease, hire or purchase new equipment or vehicles for your business.
Small business loans can be used to boost your business funds or for purchasing new premises. Interested in applying for business finance? Read on below for what you can use these loans for.
You can purchase inventory
If you sell products, the chances are that your cash flow can often be dictated by having to restock your shelves. But if you have a business loan, you can purchase more inventory to replenish your stock and stay in operation throughout the year.
Purchasing new inventory during seasonal dips, such as selling out of items during the festive season, can become expensive. This is where finance can come in handy. You can have the funds deposited into your company bank account and use it solely for restocking your shelves, allowing better management of accounts during these trying times. It is not a long term solution, however, to use a loan to purchase inventory can be helpful for small businesses just starting out.
You can upgrade equipment
Having outdated equipment will put you at a significant disadvantage to your competitors. This can be remedied by taking out business asset finance in order to upgrade your current equipment. You can lease, hire or even purchase everything you need to maintain your original business plan.
For example, a transport or logistics company can use this finance to improve their fleet, to upgrade their current trucks, or to provide new technology to drivers to help them navigate the South African roads. If you are a boutique design agency, you can use your loan to purchase new computers with the latest software so that your staff is always on the cutting edge of all trends. On your loan application, be sure to list what you plan on using the money for so that you have accurate estimations of your interest rates.
Keep your office operational
Keeping your office operational means that you need to pay for day-to-day expenses. This can include anything from replacing an old coffee machine so your staff stays caffeinated to paying the utility bills so that your office does not go dark when you need electricity the most.
This could be seen as starting capital for small business owners, which you can then supplement with more income or repay once your business starts to earn more and become successful. You could create a list of all of your needs, such as paying lights and water bills or fixing kitchen equipment and look for those that you need to focus on the most. For example, your staff could bring their own lunches into the office in case you need to replace the fridge or you could strike a deal with a nearby coffee shop to save yourself from spending unnecessarily on expensive coffee equipment.
You can boost your marketing budget
Marketing is not easy to understand for everyone. While you might have a brilliant business mind, your aptitude for selling and marketing your company might not be your strong suit. This can be helped by investing a business loan into a marketing company for your strategy, which can help build awareness about your business and make it a success.
You will have improved brand visibility and can reach customers in new and exciting ways. And you will also see a significant return on investment when reports and analytics come in showing your business’s performance. Marketing is an integral part of building a flourishing business, so using your loan for this purpose would not be a waste. Be sure to speak to your lender about whether this is an acceptable use of your business finance and what the interest rates would be.
A business loan can be a sound investment, especially if you consider what it can be used for. You could look into purchasing new inventory for your shelves during a busy shopping period, or upgrade your machinery for your next big project. You can use the money to keep your day-to-day expenses from becoming overwhelming or boost your marketing budget so you can reach customers and build your business.
Does Your Business Really Need Funding?
Strategy, risks, and opportunities.
Businesses need capital to grow, and most small enterprises rely on external funding to meet this requirement. While accessing funding can be challenging for entrepreneurs, taking on the financial commitments of a loan should never be taken lightly. Many small businesses fail because repayment conditions are so onerous they impact cash flow, and business owners end up blacklisted, which dampens their future prospects.
First, ask yourself some hard questions
Before you decide to apply for that loan, cash advance or capital injection, make sure that your business really needs funding. Critically evaluate your business. Consider that you’ll ultimately need to give something back for that funding – an equity stake, or interest payments.
Determine how much the extra funding is worth to you, and what would happen to your business if you couldn’t get it.
Define your goals
The type of funding you need (and how you validate it in the application) is dependent on your short- and long-term goals. If you’re not currently on track to achieving your business objectives, determine what stumbling blocks or pain points are holding you back. Ultimately, you should be certain that the capital will help you achieve your objectives.
Evaluate your financial pain points
Next, determine which of the identified obstacles can be overcome with extra money. While most could, a loan may not be the answer. Entrepreneurs often use financing to temporarily plug holes, instead of fixing them. Without addressing the root cause of the issue, the business will continue to struggle, while also dealing with the extra debt.
It is also important to consider the nature of your requirements, and the impact this will have on finances. For instance, using a loan to hire more staff requires upfront funds before additional revenue can be generated. The same applies to sales and marketing initiatives.
Expanding your footprint as part of a strategic plan to grow your business also requires funding, but these are usually long-term loans that take more time to pay back. A thorough evaluation is needed to determine the potential return on investment and compare it to other opportunities.
Evaluate if the strategic benefits will outweigh the mid-term cash flow risks.
Consider your options
Before making any financial commitment, first look for ways to optimise your operation to realise cost efficiencies within the business that can free up working capital to fund the fix.
If you determine that funding will address your pain points, by boosting inventory ahead of a seasonal spike, for example, consider vendor financing or supplier credit options before securing financing from a bank.
If you need to expand the business, look for ways to lower the associated costs. For example, franchising a new location to a competent partner can relieve you of some of the financial burden. A product-based business could perhaps generate extra income by selling via online channels, or through distributors or other retailers instead of a new store.
However, should you choose to proceed, before you sign any loan or credit agreement, make sure you consider all possible scenarios:
- How long will it take before your investment starts covering the costs of your loan?
- How will you manage repayments if your forecasted growth doesn’t materialise?
- How can you pivot to reallocate resources if your plan is not working out as initially intended?
The bottom line
Before you start looking for funding for your business, critically evaluate if your business really needs it. If you decide capital is necessary to reach your goals, and you’re willing to take on the responsibility, carefully consider the type of funding that is best for your particular type of business and your specific needs.
How Investors Choose Who To Invest In
Why entrepreneurs tend to focus on the wrong things when pitching to investors, and what investors are really evaluating instead.
The hypothesis of my book Lose the Business Plan was that great businesses are not determined by Excel spreadsheets and the all too predictable J-curve, but rather by the entrepreneur or entrepreneurial team and their ability to see opportunity, navigate obstacles and make things happen.
The truth is that entrepreneurs focus on the wrong side of the coin when meeting with an investor. They focus on the deep detail of the business plan and concentrate on justifying assumptions, predicting and overcoming objections, and emphasising market potential. Yet it’s my experience that the real decision on whether or not to invest in a company is more heavily weighted towards the entrepreneur or team rather than the business plan itself.
Once the ‘numbers’ stack (in other words, the business model makes sense) and the risks have been considered and appropriately mitigated, then the real decision-making can begin. The final decision comes down to four important characteristics of the entrepreneur himself or herself.
1. Is she honest?
You may have the best business plan in the world and you may have mitigated every possible risk but, if you are not someone the investor can trust, no deal will be made. I find that entrepreneurs often underestimate the importance of their reputations and, in today’s connected world, it’s so quick and easy to reference someone’s character.
Entrepreneurs who think about the short game and make morally questionable decisions for the prospect of quick profits generally find themselves in an ever-diminishing circle of people who will do deals with them. Your reputation is everything and you should guard it at all costs.
2. Does she work hard?
I am still not resolved around the cliché that you should work smart and not hard. (Perhaps I missed the memo or was asleep during the lecture that demonstrated how this is possible.)
In a world that is changing at an astonishing rate, in an economy that is becoming more and more competitive and in a business environment that is becoming ever more complex, it’s hard work to remain relevant and ahead of the curve for any extended period of time. Every quarter sees a new trajectory that needs to be investigated and navigated. In my opinion, this requires not just smart work but hard work, too.
It’s certainly true that investors like to invest in entrepreneurs who will take their investment seriously, who take their businesses seriously, and who are on top of their games.
3. Is she smart?
Smart does not always mean book smart but it definitely means street smart. It means having the ability to read a room, to see an opportunity, to learn new skills quickly and also being able to apply new learning’s to the business.
Investors look for investees who show agility when adapting to feedback from the market, from their competitors, from their staff and more.
4. Is she ambitious?
Investors do not like investing in ‘mom and pop’ operations. They seek the highest return on investment and that comes from businesses that can scale profitably. Scale is always relative to the investor’s perspective and not your own.
An investor with a couple of hundred thousand rand to invest will have very different expectations of the size of business he or she would like to invest in compared to another investor who has tens of millions of dollars. It’s important for the entrepreneur to authentically resonate with the level of ambition of their prospective investor, and be able to express that ambition through a coherent and cogent vision, as well as a plan to achieve that vision.
Remember, no one starts out as the ideal investee. It’s something that is built up over time and requires constant maintenance and curatorship. It’s essential to continually work on your reputation, to ensure that you are up to date with your industry, and to reassess your level of competence in your market. This is the only way to make sure you become and remain an ideal investee to a potential investor.
Read next: The Investor Sourcing Guide
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