A Guide to Accessing Funds That Can Help Your Small Business

“All company bosses want a policy on corporate social responsibility. The positive effect is hard to quantify, but the negative consequences of a disaster are enormous” (English economist and academic, Noreena Hertz)

Stimulating the SME sector is considered as one of the quicker ways to rejuvenating the economy. According to a 2020 survey by McKinsey & Company, SMEs make up over 98% of South African businesses, and employ between 50% and 60% of the workforce.

However, it takes money to run a business and there is a need for assisting and guiding SME owners to secure more funding, particularly given the devastating impact of the Covid-19 pandemic over the past two years.

There are varying reasons why these small businesses need additional capital, determined by differing requirements in the business value chain – including the scope of production, workforce and the nature of the business, among other factors.

Some – but not all – of the funds available in the market are allocated according to specific trades, departments in the production process and demographics of the directorship – usually according to age, race, location and gender.


Here are some examples of the grants and funds available, along with a brief overview of the funding models

 

  • Equipment related financial support. The Department of Trade and Industry’s (DTI) Small Enterprise Development Agency (SEDA) Technology Program, provides both “financial and non-financial technology support” – meaning either funds or equipment support for small enterprises.
    • Staff training. The DTI’s Black Business Supplier Development Program offers grants in a cost-sharing scheme to black-owned businesses for the purpose of business skills training.
    • Female directors can take advantage of gender-empowerment funding programs like the Business Partners Women in Business Fund, which is aimed at increasing access to finance for female entrepreneurs for them to start, expand or purchase existing businesses.
    • A more narrowed down version of this model of funding is the I’M IN Accelerator Fund, which is for black South African women who have founded technology start-ups. They can apply to be part of this 10-month long acceleration program and possibly access up to R1,5 million in pre-seed capital, mentorship, marketing support and follow-on investment. The business has to be 51% black- and-women owned to qualify.
    • The National Empowerment Fund (NEF) is a black economic empowered driver and funds businesses with a black majority ownership.
    • The DTI funding model is usually segmented according to factors like industry, marketing channels and/or the age of the directorship. However, qualifying small businesses can currently obtain the following loans and grants:
  • The Umsobomvu Youth Fund: A Government initiative aimed at creating opportunities for South African youth in entrepreneurship and job creation, helping youth setup, expand and develop their businesses by teaching them essential business skills. Umsobomvu is a Voucher Program not a loan program. The Voucher Program provides support services to both new and existing youth owned businesses.
  • The Agro-Processing Support Scheme (APSS) is a R1-billion cost-sharing grant fund aimed at boosting SME investments in the agricultural space. Minimum qualifying investment size, including competitiveness improvement cost, will be at least R1 million.
  • The Aquaculture Development and Enhancement Program (ADEP) is a cost-sharing incentive program for projects in primary, secondary and ancillary aquaculture (activities in both marine and freshwater).
  • The Support Program for Industrial Innovation (SPII) is aimed at funding the innovation and development of technological products in South Africa.
  • R&D Tax Incentive is supported by the Treasury and offers a deduction of 150 percent in respect of expenditure on eligible scientific or technological Research and Development (R&D) undertaken by companies in South Africa. In his 2022 Budget Speech, the Minister of Finance announced that the R&D Incentive is under review but that it will be extended in its current form until 31 December 2023
    .
  • The De Beers Fund: At a more localised level, a large diamond mining company also awards grants, for small businesses located in its operating areas. These areas are Kimberley and surrounding areas in the Northern Cape, Viljoenskroon and surrounding areas in the Free State, Musina, as well as the Blouberg Local Municipalities in Limpopo.
  • Tshikululu Social Investments: Tshikululu is South Africa’s leading social investment fund manager and advisor, working alongside investors and other development partners to achieve sustainable social impact. The organisation manages other companies’ CSI funds.

    Over the years, the organisation has managed the likes of the De Beers Fund, Rand Merchant Bank Fund, among others.

  • SA SME Fund:  Established by members of the CEO Initiative as a collaboration between government, labour and business to address some of the most pressing challenges to the country’s economic growth – as an avenue of support for the SME sector. The SA SME Fund invests in repayable funds that support and develop entrepreneurs, typically with an enterprise value of less than a R100m.
  • Financiers: These are licensed lenders with their own products and terms of trading, being that they are private entities. However, the terms have to be agreeable with trade regulations, including Fair Practice – which protects the borrower’s interests.

    If you need an urgent loan, private financiers might be an alternative to the grants and cost-sharing schemes mentioned above. There are several types of loans that small business owners can apply for, depending on the individual needs of their businesses. The following are the repayable financing products available to SMEs:

  • Purchase order finance is used by a business to complete an existing order.
  • Working capital finance is an option that can boost a small business with much needed cash flow.
  • Bridging finance is a short-term loan that can be used by small businesses to finance their working capital. An example of this is Lula-lend, which positions itself as a good option if your business requires a loan provider and you need urgent funds of between R10 000 and R5 000 000. The company can have the funds in your account within days and repayment is over 3-12 months.
  • Credit cards can be handy for entrepreneurs; however, they require discipline as their interest charges and repayment rates are normally higher.
  • Inventory loans can help your small business keep enough stock in the inventory. It is more suitable for small businesses with tangible products to sell.

Because of the varying types of funds, SME owners are encouraged to consult with financial advisers in order to make the right decisions for their individual businesses’ needs, the amount required and the right funding model.

Don’t miss out, ask for professional advice about grants and take advantage of the opportunities they afford small businesses.

When, Why and Whose Jobs You Should Be Outsourcing

“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.” (Lee Kuan Yew, Former Prime Minister of Singapore)

Launching a business requires the small business owner to wear many hats. From marketing, to accounting and HR the small business owner needs to learn any number of skills to get their venture off the ground. Eventually though there comes a point where doing everything yourself as owner is hurting the company more than helping it and knowing when to bring help on board can be the difference between success and failure.

If you aren’t quite ready to hire employees or if you just need a few hours of help a week as opposed to full time, outsourcing work can become the solution you are looking for. With many professionals working freelance it is easier now than it has ever been to find the right people to pick up the slack and give you a few extra hours in your day to focus on the core of your business.


When is it time to outsource?

Knowing when to outsource is critical. Bringing people on board at the right time can free up hours a week and give you the opportunity to win new clients or refine your product offering. So what are the signs you should be considering outsourcing?

  1. You find you don’t have time to do all the workHaving plenty of work is a blessing but having too much can mean repeated late nights or missed deadlines. Making sure you keep on delivering at your best means you can’t afford to be tired, rushing jobs or worse, simply turning work away. If this is a problem that’s happening every month then it’s definitely time to consider bringing someone on board.
  2. You want to turn away new workTurning away work is always a bad idea. Once turned away those clients may never come back whereas getting what they need done could build additional income for life. Whether it’s simply helping them with your core services or taking on new growth areas for your company, always rather outsource some of the work and make sure you can make it work for these new customers.
  3. You get hired for irregular or once off projectsIf you find the work is regularly outstripping your capabilities and capacity it might be time to bring on permanent employees, but when your business is getting once-off projects or work that will only last a short while it can be much safer to outsource work to freelancers or agencies. This way you can meet your needs for those projects and not worry about paying people in the months where you don’t have as much work.
  4. There are tasks you hate doingYou may be surprised to see this on the list, after all surely you have become used to telling yourself to get over it and just plough through? The truth is, work you hate is work you are likely doing badly. Save yourself the time and the pain of doing a bad job by giving it to someone who specialises in that field and is going to get it done well.


The best jobs to outsource

Outsourcing doesn’t just refer to those jobs that are directly related to your business. Sometimes it can actually help you to hire a domestic, an au pair or a personal assistant at home to free up a few more hours you can dedicate to the business. Outsourcing business functions though is much more likely to be the right choice when it comes to getting yourself some valuable time as these jobs can generally be trickier, better done by professionals and may, in fact, lead to long term growth of your business as well as simply giving you some breathing room.

  1. Accounting, bookkeeping and payrollFor those unused to finance, tracking income and expenditure, invoicing clients and filing tax returns can be extremely time consuming. Given that you are running a small business it might be cost-effective to outsource bookkeeping and payroll because you can then pay a set amount that changes as the company grows, rather than paying an employee full time and having the hours vary. This bookkeeper can also be in charge of extra tasks such as document scanning to help keep your receipts and bank statements in order.

    At the end of the year handing your taxes over to an accountant is invaluable. Not only will it take an important task off your plate but can often get you a percentage of that spend back in tax savings. Outsourcing some decision-making to an accountant may help as well, as they will be able to run the numbers and advise on whether a new venture, expansion or client is viable. They can also help you work out whether outsourcing or bringing someone in-house is the right solution for you.

  2. Human ResourcesHuman Resources isn’t quite as simple as hiring and firing. There are so many rules and regulations involved in the running of good HR, not to mention submission of PAYE, UIF, pension contributions and returns etc., that doing it yourself may end in bitter acrimony and high costs.

    Hiring a company that specializes in human resources laws and regulations will not only help you stay compliant and up to date but can also streamline the onboarding process of new employees and the hiring process in general. A good HR company or freelancer will additionally handle details such as retirement plans, group health insurance, and other benefits that you offer, saving a huge amount of effort and time.

  3. Marketing and content creationAlmost everyone believes they can write well enough for a website, blog or LinkedIn update, but there is a lot more that goes into these things than simply filling a page. With SEO, and content tailored for the outlet it’s being used on, creating content can be a time-consuming job for those who aren’t experts. Developing strategy and deploying it correctly takes a professional and handing this task over to an outsourced freelancer will often pay for itself in the success of your digital marketing.

    This is all also true for PR and other marketing. It may seem simple to send off an email detailing your recent projects and successes, but professional PR people will ensure it’s read by the right people. With a PR professional you aren’t hiring a writer, you are hiring a network of important contacts.

    Finally, no business can succeed without advertising and bringing marketing people on board will be essential if you don’t want your extremely useful product or service to vanish unnoticed by the public. The good news is that provided you hire the right people, what you spend on advertising will almost certainly come walking back through your door at a later stage in the form of customers.

  4. Graphic design and presentation construction Your last job required you to put together a few PowerPoints so now you sit and laboriously put together your pitches and presentations yourself. The truth is, unless you’re a skilled designer yourself, your digital presentations could definitely use a boost, so instead of wasting your time on PowerPoint animations and choosing fonts rather spend a little money to make your pitch look extra good and use the time you’ve just saved to rehearse your presentation.


Is outsourcing “the future of work”?

Outsourcing is increasingly being touted as “the future of work”, and certainly the truth is that it is here to stay. Those who refuse to put the work they can’t do perfectly out to the new wave of freelancers and outsourcing agencies are ultimately only hurting their business.

Of course, the ultimate question is whether outsourcing makes commercial sense for your business, given your particular financial situation and business structure. Chat to your accountant to see where it may be right for you.

Your Tax Deadlines for March 2022

  • 7 March Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 March Value-Added Tax (VAT) manual submissions and payments
  • 30 March Excise Duty payments
  • 31 March End of the 2021/22 Financial year
  • 31 March Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable