There is no single set of start-up business loan requirements in South Africa. What you need depends on who funds you: a state agency such as sefa (now part of the Small Enterprise Development and Finance Agency, SEDFA), the NEF, the NYDA or the IDC, or a commercial bank. Each sets its own criteria, and some of what is called start-up funding (the NYDA grant, for example) is not a loan at all.
Start-up applications are judged on the plan, the owners and the amount they put in themselves, rather than on a trading record. Below are the published criteria for each funder, so you can see which ones you can meet before you apply.
Eligibility Requirements at a Glance
Start with the funder, because the eligibility tests are very different.
- sefa direct lending: a South African citizen with a valid ID, or a legally constituted business (sole trader with a fixed address, partnership, co-operative, CC, Pty or public company) operating in South Africa. Its criteria require a 100% South African controlling interest, at least one owner involved in running the business, a commercially viable business that can repay the loan, and a 51% or more black ownership qualifier for direct lending. The SEDFA financial-support page no longer shows these direct-lending criteria, so confirm the current product with SEDFA.
- SEDFA Youth Challenge Fund: owners aged 18 to 35, the business registered with CIPC (and prepared to register with SARS and UIF), 100% South African owned and with owners involved in day-to-day management. See the Youth Challenge Fund page.
- NEF: assessed on commercial viability, legal compliance, black managerial and board involvement, ability to repay, job creation and location. A minimum of 50.1% black ownership is a requirement. See the NEF funding criteria.
- NYDA grants: young people aged 18 to 35 who are South African citizens or residents, with skills or potential skills suited to the enterprise.
- IDC: a new or registered existing business that can create jobs, has a completed business plan and economic merit, makes a reasonable owner contribution, offers security and complies with South African statutory requirements. See the IDC FAQ.
Income and Affordability Requirements
With no trading history there are no past earnings to assess, so the lender looks at whether your forecast shows the business can repay. State the assumption behind every revenue line (how many customers, at what price, and why those numbers are realistic) and back it with evidence such as a signed order or letter of intent.
Some funders also set limits. SEDFA’s Youth Challenge Fund page shows up to R2 million for start-ups, and its financial-support page shows credit facilities of R50 000 to R15 million only for the Amavulandlela scheme for entrepreneurs with disabilities; it states no general direct-lending range, so confirm the current limits with SEDFA. The IDC funds start-up and existing businesses from R1 million to R1 billion. The NYDA does not fund businesses with annual turnover above R750 000 (R1 000 000 for co-operatives) and caps cumulative grants at R200 000 per individual or business over their lifetime (R250 000 for co-operatives in agriculture and technology). These are the figures published by each funder at the time of writing.
If you borrow personally to fund the business, the National Credit Act applies to you as an individual. The lender must take reasonable steps to assess your repayment history and your existing financial means, prospects and obligations before it grants credit, and you must answer its questions fully and truthfully.
Credit and Financial Requirements
Nedbank’s guidance for business owners is that a bank examines your credit history, your business’s past performance where there is one, and your financial projections, and that a new business should present a business plan with market research. sefa has expected the entrepreneur to share the risk through an own contribution, equity or personal sureties (confirm the current position with SEDFA), and the IDC lists a reasonable owner contribution.
Where the National Credit Act applies and the loan has a commercial purpose, the lender must also assess whether there is a reasonable basis to conclude the commercial purpose may prove successful. The Act does not apply to a company or other juristic borrower whose asset value or annual turnover is at or above the Minister’s threshold, which was set at R1 000 000 in the 2006 notice. Ask the lender in writing whether your agreement is regulated.
You can inspect your own credit bureau file free of charge once in any 12-month period. Check it before you apply. You can also search the National Credit Regulator register of credit providers to see whether a lender is registered.
Documents and Verification Required
Each funder publishes its own list, so ask for the current one. What is published:
- IDC: a written funding request letter, an executive summary and a completed business plan.
- NYDA: all required documents, proof that you attended business management training, and a 10-minute business pitch (in person or by phone).
- Banks: a business plan with market research, plus the credit history and financial projections the bank will examine. Ask the bank for its exact start-up document list.
How to Apply and Improve Approval Readiness
Choose the funder first, because each one is mandated for particular stages and ownership profiles. Then follow its own process.
- NYDA: apply at least 3 months before you turn 35. After your documents and pitch, an NYDA official carries out a due-diligence assessment. See the NYDA Grant Programme.
- IDC: approval ideally takes three to five months.
- sefa (SEDFA) and the NEF: check their sites for current application routes before you apply.
- Complete your business plan and cash flow forecast before you approach any funder.
- Show your own contribution clearly and early.
- Check your credit file and deal with any errors first.
For the bank route, Nedbank’s Startup Bundle is a business bank account, not a loan. It is for sole proprietors and private companies with a turnover under R1 million a year whose owners are new to Nedbank, with two years of zero monthly maintenance fees. Nedbank’s advice on strengthening a business loan application is worth reading before you apply.
Frequently Asked Questions
What are Nedbank’s start-up business loan requirements?
Nedbank’s published start-up guidance is general: it examines your credit history, your financial projections and, for a new business, a business plan with market research. Its Startup Bundle is a business bank account rather than a loan. Ask Nedbank for its current start-up lending criteria and documents before you apply.
Can I get a start up business account?
Yes. The Nedbank Startup Bundle is for sole proprietors and single-owned private companies with a turnover under R1 million a year whose owners are new to Nedbank. It is available online and carries two years of zero monthly maintenance fees.
Will a commercial bank fund a start-up?
Banks examine credit history, past performance and projections, so a business with no record has to rely on its plan and its owners. State agencies such as sefa, the NEF and the IDC fund start-ups under their own criteria, and the NYDA offers grants to young entrepreneurs.
Do I need to contribute my own money?
Funders expect the owner to share the risk. sefa has referred to own contribution, equity and personal sureties (confirm the current position with SEDFA), and the IDC lists a reasonable owner contribution.
Is an NYDA grant a loan?
No. NYDA grants are not credit. The grant programme is for people aged 18 to 35 and has a lifetime cap of R200 000 per individual or business.
Criteria and funding windows change, so confirm the current position with the funder before you apply. See our loan requirements guide and browse all finance and funding requirements.