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Three Funds You Can Tap into Right Now

There are a variety of options when it comes to financing your business. We’ve picked three that are seeking to grow the South African economy by supporting SMEs, and yours may be just what they are looking for.

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R300 million funding for square pegs

Business Partner’s manufacturing fund aims to support South Africa’s long-term growth, and calls on ‘square peg in round hole ‘treps’ to make it happen.

What is it?

The Business Partners manufacturing Fund is an SME Risk Capital Fund which has allocated R300 million for investments. It is directed at stimulating and supporting entrepreneurial involvement in a sector that has the potential to accelerate the country’s development. The manufacturing sector contributed 15,2% to South Africa’s GDP in 2013, making it the third-largest contributor to the nation’s economy.

Related: Three Trends in Corporate Finance your Financial Director Should Know

The fund will provide investment that will result in import replacement, such as through the introduction of new products and processes currently not available or performed in South Africa, or an export promotion, such as access to new markets.

Who qualifies?

Finance is offered to manufacturers in the following sectors:

  • Agri-processing,
  • engineering,
  • textiles and clothing production,
  • information and communications technology (ICT),
  • electronics,
  • automotive and chemical,
  • green industries,
  • as well as new innovation and technologies.

How to apply for finance

To find out more, call 0861 763 346, email enquiries@businesspartners.co.za or visit www.businesspartners.co.za

Medium-term finance for growing businesses

GroFin’s investment approach is based on entrepreneurial ability and commitment. Development financier GroFin finances and supports small, growing businesses that require medium-term (four to seven years) finance of between $100 000 and $1,5 million (or the rand equivalent).

Related: Billionaire Wisdom: 8 Insights From a Quartet of the World’s Most Effective Entrepreneurs

What is it?

GroFin believes that the key success factor of a business is the entrepreneur and its investment approach is largely based on assessing an entrepreneur’s ability and commitment to make the business a success.

It invests in businesses that are owned and managed by entrepreneurs who have a track record and industry expertise, are committed to professionalising the business and putting in place financial management systems and good governance, have an own investment in the business, and have growth ambitions.

Investment is in the form of local currency, medium-term, self-liquidating debt that has a repayment structure aligned with the business cash flows. While owner investment is preferred, a lack of collateral will not disqualify a business, but will form part of the risk assessment and pricing structure.

Who qualifies?

To qualify, your business should have:

  • Fewer than 150 employees
  • An annual turnover not exceeding $15 million
  • Gross assets not exceeding $6 million.

How to apply for finance

To find out more, call +27 (0)12 998 8280, email info.southafrica@grofin.com, or visit www.grofin.com

Support programme for incubators

The Department of Trade and Industry (the DTI) has an Incubation Support Programme (ISP) to develop sustainable businesses.

The ISP aims to ensure that SMEs become sustainable and enter into the mainstream economy. It encourages partnerships in which big businesses assist SMEs with skills transfer, enterprise development, supplier development and marketing opportunities.

Related: 7 Tips for an Investment Pitch That Excites and Inspires

The following costs are eligible for support:

  • Business development services
  • Market access
  • Machinery, equipment and tools
  • Infrastructure such as buildings, furniture
  • Feasibility studies for establishing and expanding incubators
  • Product or service development
  • Information and communication technology (ICT)
  • Operational costs.

Grant support

  • Grant approval is based on projections for the first year at application stage.
  • All payments will be made directly to the incubator’s primary account.
  • The grant approval is capped at a maximum of R10 million (VAT inclusive) per financial year over a three-year period.
  • The ISP offers a cost-sharing support of 50:50 for large businesses and a cost-sharing of 40:60 for SMEs.

Who qualifies?

The applicant must either be a registered legal entity in South Africa in terms of the Companies Act, the Close Corporations Act, or the Co-operatives Act, or be a registered higher or further education institution, or be a licensed or registered science council.

The programme is available to applicants who want to establish new incubators or wish to grow and expand existing ones.

How to apply for finance

To find out more, call +27 (0)12 394 1073, email appisp@thedti.gov.za, or visit www.dti.gov.za

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SAB Transforms Supply Chains

Supplier Development Programmes grow black-owned suppliers and create jobs.

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The South African Breweries (SAB) has invested more than R200 million into creating an inclusive supply chain that incorporates black-owned and black women-owned SMEs through its supplier development programmes, SAB Accelerator and SAB Thrive. In addition, more than 100 jobs have been created through these efforts.

SAB Accelerator and SAB Thrive aim to create a diversified and inclusive supply chain by supporting the growth of black-owned suppliers through business development support and funding. The programmes are two of four entrepreneurship development programmes run by SAB to help create 10 000 jobs in South Africa by 2022 — SAB KickStart, SAB Foundation, SAB Accelerator and SAB Thrive.

SAB’s agriculture programmes also contribute towards the aim to create jobs by growing emerging farmers.     

Related: SAB-Commissioned Research Shows SA Poised To Reap Entrepreneurship Rewards

“From rural entrepreneurs to big business, SAB has laid the foundation to support entrepreneurs and to contribute towards government’s efforts to grow the economy and reduce unemployment in the country,” says Ricardo Tadeu, Zone President, SAB and AB InBev Africa.

“We recognise that one of the major hurdles for SMEs in South Africa is the ability to gain entry into big business and form part of their supply chains. This requires a symbiotic relationship with big business working alongside smaller suppliers.”

SAB Accelerator and SAB Thrive cohesively solve the challenges of creating a healthy pipeline of suppliers that represent the demographics of the country. SAB Accelerator has piloted ten businesses that have created 29 permanent and 79 part-time jobs in a period of just six months, and is currently incubating 24 businesses as part of the official post-pilot intake. SAB Thrive has invested R100 million in seven businesses, which have created 46 new jobs. In addition, the programme has contributed R140 million in new B-BBEE preferential spend.

The SAB Accelerator is an in-house programme dedicated to developing black-owned and black women-owned suppliers. Geared towards fast-tracking participants’ growth, the programme employs ten highly experienced business coaches and ten engineers, offering both tailored business and deep technical coaching to the participants.

It has a three-phased approach consisting of:

  1. Diagnostic: Screening the business’s current situation and systematically identifying gaps and opportunities for growth.
  2. Catalyst: Proposing an intensive three-month coaching intervention addressing key business functional and technical areas of improvement or growth.
  3. Amplify: Providing additional business development to support graduates of the Catalyst Programme.

The SAB Accelerator strongly focuses on enhancing market visibility and access of its participants.

Eligibility criteria:

  • Existing black-owned or black woman-owned suppliers currently servicing SAB’s supply chain at the time of application.
  • Existing black-owned or black women-owned businesses that have potential to join the SAB supply chain based on their product or service.

The SAB Thrive fund is an enterprise and supplier development (E&SD) fund set up to transform the company’s supplier base. The fund was established in partnership with the Awethu Project, a black private equity fund manager and SME investment company. The aim is to invest in and transform SAB suppliers to represent our country’s demographics. SAB Thrive investees benefit from 100% black equity capital and business support.

Related: 6 SAB Entreprenurship Programmes That Provide Business Management And Support

The fund invests growth equity capital into SAB’s existing high-growth black-owned suppliers, furthering their profitable expansion into the SAB supply chain without diluting the black-ownership of these businesses.

Existing white-owned suppliers are provided equity capital to support the enhancement of their black ownership, while facilitating the introduction of black entrepreneurs to their business. The intention is to apprentice the individual to take over the business in the near future.

Eligibility criteria:

  • Black-owned suppliers in the SAB supply chain that want to grow their business through access to black-owned growth equity capital.
  • Existing white-owned suppliers in the SAB supply chain that want to transform their B-BBEE ownership.

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Alternative Finance – Filling The Gap

Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding.

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Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding. It does not replace traditional finance but rather functions as a complementary and additional form of funding.

Alternative financers are specialists – they focus on a particular need and on a specific audience. As a result their ‘how’ is customised to deal with their chosen target market and for this targets unique needs. This applies to the funder’s processes and to their level of flexibility around things such as collateral. An example of this is that a SME may have an existing R1 million overdraft (their traditional finance) secured by R 1.5 million collateral but suddenly they need R5 million for some kind of contract or bridging finance – they need it fast and don’t have that extent of collateral.

The traditional funder cannot provide what they need, their process is too long and their flexibility is too low. An alternative financier providing bridging finance and specialising in SMEs is ideally positioned to fill this gap.

Related: 5 Key Questions To Answer For Raising Funding

One of the most significant differences between a traditional funder and an alternative financier is in their process. In the case of the alternative financier, they have often chosen to deal exclusively with a particular customer base, for example SMEs. As a result, this funder has both an affinity and contextually relevant empathy in working with SMEs.

Not only do they speak the same language the funder also has an appreciation for the time and material constraints of the SME and has developed their processes to cater to this market. This applies most notably to the turnaround time of the funding need and to the assessment aspect – where flexibility around things such as collateral is vital in making the finance happen for the SME.

A traditional funder is unable to meet the deadline of a bridging finance need, submitted on an urgent basis, where the finance is needed as soon as 2-3 days from time of application. A specialised or alternative funder is able to do exactly this. A traditional funder is also unable to find creative methods in solving the SMEs lack of high-value collateral in applying for finance.

This SME has generally already used their high-value collateral for traditional credit facilities but now needs funding for growth or resolution of a temporary cash flow challenge. An alternative financier is able to look at such an application in a different way, and has most likely already established alternative ways to make this happen for the SME.

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How to Guides

6 Money Management Tips For First-Time Entrepreneurs

That R25 coffee every morning isn’t taking you to the next level any faster than brewing a pot at the office.

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How many times have you been told that saving money is a good thing? Financial specialists recommend that you save a bit of money every month, but that’s easier said than done. After all, it’s not uncommon for people to live paycheck to pay cheque.

However, if you want to start a company, you’ll need to break away from this cycle and start budgeting and saving. At times, this will be a trying task, but it must be done if you want to invest in your future as an entrepreneur.

If you want to start managing your money more effectively and set yourself up to become an entrepreneur, follow the six tips below. With these techniques in your arsenal, you’ll start so see immediate changes, and you’ll set good behaviours in motion that’ll serve you throughout your career as an entrepreneur.

1. Prioritise organisation

When you are organised, you can track every facet of your finances. Record all of your financial information in one place so you can refer to it and keep track of your progress.

When you chronicle all of your financial information, you may want to try and organise it by category. For example, when you are recording your current costs, you can categorise them as “urgent” and “future.”

Not only will this system help you stay on top of your personal finances, but it’ll prepare you for entrepreneurial success because it’s a directly transferable skill.

Related: Smart Money For Small Businesses

2. Check your credit

According to a recent MoneyTips survey, nearly 30 percent of people don’t know their credit score. If you are among this group, it’s time to request a free credit report. Once you know your number, assuming money’s tight, feel free to use a few do-it-yourself credit repair techniques to quickly improve your score.

Understanding your credit score and improving it to the best of your ability is paramount when it comes to money management. A little-known fact among aspiring entrepreneurs is that the funding a new business receives is often dependent on the founder’s credit score.

3. Save where you can

People often cringe when they think about cutting back. Fortunately, there are several painless ways to save. Look at your daily habits and see if you have any spending trends. For example, if you spend $5 every day on lattes, you might consider cutting back and only having the expensive latte every other day. Slowly, you’ll get used to this new habit, and your bank account will reap the rewards.

Related: Time Is Money: Tips To Help You Use Yours Well

4. Search for additional information

The Penny Hoarder

Have you heard of The Penny Hoarder or Dough Roller? These are just two personal finance blogs that can help you better manage your money, but there’s a whole lot more out there.

Subscribe to websites and follow podcasts that offer advice on money management. Also, keep your eyes peeled for informative outlets that speak directly about entrepreneurial finances and follow them, too.

5. Set long- and short-term goals

Have you ever noticed that people want to reach their goals in as little time as possible? If you pick up almost any given health magazine, it’ll claim that it can help you achieve extreme results in little to no time.

Unfortunately, crash diets are often ineffective, and “get rich quick” money management techniques often lack substance.

It’s hard to accept that your goals will take time to accomplish, which is why you create short- and long-term goals. In either case, aim to make goals that are specific, measurable, attainable, relevant and time-based. Ideally, accomplishing your short-term goals will give you the positive feedback that you need to continue striving for your long-term goals.

Related: If You’re Trying To Raise Money, Doing Any Of These 9 Things May Scare Off Investors

6. Find a mentor

If you manage your personal finances and entrepreneurial finances, one thing is certain – at times, it will feel like you can’t keep up with everything. Financial planning can be difficult, and it’s not uncommon for it to feel overwhelming.

As an individual, you can seek out mentors that can help you with personal finances. As an entrepreneur, you can continue to work with these people or seek out more established financial consultants that provide you with guidance you need to run your business.

Managing your finances is a trying and rewarding experience. It will feel messy at times, but the more you practice, the more you’ll improve your personal finances and set yourself up for entrepreneurial money management success.

This article was originally posted here on Entrepreneur.com.

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