Two of the more prominent government investors are the Small Enterprise Development Agency (SEDA) and Small Enterprise Finance Agency (SEFA). Both, unsurprisingly, were established to assist SMEs. However, their similar names and mandates have led to a lot of confusion as to what they actually do and when they are worth approaching. So here’s some clarity.
Contrary to what many startup entrepreneurs assume, SEDA does not provide any direct funding. Instead, it subsidises business development services like training, consulting and incubation. Much of its support is aimed at startups (e.g. creating a business plan).
SEFA, on the other hand, does fund directly in the form of small loans. It provides up to R5m for asset finance, bridging capital, and revolving credit facilities. It is, essentially, a state bank for SMEs with higher risk tolerance than commercial lenders.
Like most government agencies, SEFA takes a notoriously long time to process applications. Expect at least three months before a decision gets made, and at least six months before funds get disbursed. Would-be applicants should apply well in advance since they will need to submit a business plan and supporting documentation, which will usually take at least a few weeks to collate.
Clearly, SEDA is a non-starter for SMEs that need growth capital. SEFA is a more viable option, subject to its investment limit and long application process. Commercial lenders will almost always be quicker and cheaper. But if you don’t qualify for any commercial finance, have relatively small funding requirements, and can afford to wait, then SEFA is an option worth considering.
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