In the past businesses seeking funding were at the mercy of banks, investors or waiting in line for government funding. But as of April 2012, SEFA, the Small Enterprise Finance Agency, launched, providing hope for aspirant entrepreneurs all over the country. Here’s what SEFA does and how.
SEFA is the Small Enterprise Finance Agency established in April 2012 when South African Micro Apex Fund (SAMAF), Khula Enterprise Finance and business activities of the Industrial Development Corporation (IDC) merged.
The purpose of SEFA is to respond to and meet the financial challenges faced by small and start-up businesses by providing and facilitating access to finance.
SEFA services are primarily targeted to survivalist, micro, small and medium business enterprises and co-operatives that need development to contribute to the economy and employment.
As of April 2013, SEFA plans to distribute R737 million to more than 15 000 small (but mostly micro) businesses by the end of the 1013/14 financial year – helping to create 18 000 jobs.
The organisation lends small businesses amounts ranging from R500 to R3 million in three main ways: Straight to the business owner, via retail finance intermediaries, and through banks using credit guarantee schemes such as Khula.
History of SEFA
The merger was initially brought to public attention when it was announced by the President in the State of the Nation Address in February 2011; leading to the establishment and launch of SEFA in April 2012.
What sets SEFA apart from its predecessors – SAMAF and Khula – is that where they only fund SMES through banks and other intermediary institutions, SEFA provides cash directly to entrepreneurs wanting to either start a business or expand an existing one.
This is an important breakthrough for small businesses previously denied finance for their business by banks because of inherent default risk.
Mandate of SEFA
The mandate for SEFA is to develop sustainable survivalist, micro, small and medium enterprises and co-operatives with the intention of improving local economies and providing job opportunities.
How SEFA hopes to help SME business in South Africa
Over the next five years (from 2013), it aims to have doubled the number of businesses financed to 34 000 small businesses, doubled lending to R1,6 billion.
Finance will be available to micro, small and medium enterprises and co-operatives through bridging finance, revolving loans, asset finance, working capital and term loans.
The agency also plans to investigate partnering with retail chain stores and government feeding schemes in order to:
- Expand more effectively into rural areas
- Improve pre-loan support programmes in partnership with Small Enterprise Development Agency (SEDA) to improve uptake of its credit guarantee scheme.
- Improve partnering with provincial development finance agencies
- Expand its pilot project in partnership with the SA Institute of Chartered Accountants (SAICA) that trains young graduates how to assist small businesses.
It also plans to roll out another nine branches per year, co-located within SEDA or IDC branch offices.
Any small business with a viable business plan can apply for a loan. SEFA will evaluate the business to determine whether it will be able to afford funding, what it will be able to repay, and over what period of time without negatively impacting cash flow.
Visit www.sefa.org.za for more information.