The Sab Foundation Announces A R88 Million Entrepreneurial Fund Set Up To Support Entrepreneurs
The Sab Foundation Announces A R88 Million Entrepreneurial Fund Set Up To Support Entrepreneurs. The SAB Foundation has announced the launch of an R88 million Financing for Impact Fund in partnership with Lead Impact Capital and the National Treasury’s Jobs Fund. The purpose of the Impact Fund is to provide affordable financing to qualified alumni of its entrepreneur programs.
SME’s are largely lauded as being the job creators of the future. However, there is a major stumbling block to this theory because creating jobs relies on business growth, and business growth often requires finance. Through its work with entrepreneurs over many years, the SAB Foundation has become very concerned about the financing gap that exists in South Africa. Small businesses often don’t have much collateral and are perceived as high risk by the investment community.
“This perceived risk translates into businesses either not qualifying for finance, or when they do, interest rates can often exceed 20%, with some short term cash flow lenders charging interest rates as high as 30%,” says Bridgit Evans, Executive Director of the SAB Foundation. “This leads to a high default rate, further discouraging investors from lending into this market, which creates a vicious cycle. It is understood that investors have a fiduciary responsibility to protect assets and many have been negatively impacted through the non-repayment of loans,” she continues. “If South Africa truly wants to grow the economy and create jobs, we need to find innovative financial products that do not pass on the high interest rates to SME’s.”.
“Together with Jobs Fund and LEAD Impact Capital, we are testing a model to address this, by mitigating risk in three ways,” explains Evans. “Firstly, wherever possible, entrepreneurs must cede contracts to the Foundation. Secondly the Impact Fund is underpinned by grant capital, allowing interest rates to remain affordable at between prime minus 2 and prime plus 3. Lastly, while most financiers only meet the business owner for the first time when they come to borrow money, this Fund is only lending to entrepreneurs that SAB Foundation has already spent at least two years mentoring and training,” she explains. “This offers the advantage of using other metrics to assess the entrepreneurs character and their likelihood of honouring the loan.”
Eligible candidates are graduates from the SAB Foundation Tholoana Enterprise Fund, the Tholoana Enterprise Programme, the Social Innovation and Disability Empowerment Awards, and the Social Innovation Fund looking to grow their businesses and create new employment opportunities. The finance can be used for asset and equipment financing, growth financing or purchase order and cash flow financing. Loan sizes will range from a minimum of R200 000 to a maximum of R10 million and entrepreneurs will need to be able to provide sufficient documentary proof to support the loan amount applied for.
