Johannesburg-based specialist risk finance company Business Partners has launched a new R400m fund to assist small and medium enterprises (SMEs). This makes it one of the largest SME financing funds in SA.
The fund will consider first-round finance deals of up to R10m and will focus on ventures with high potential for growth. The fund will make early stage investments that follow the research and development phase.
Business Partners executive director Gerrie van Biljon says SMEs contribute 40% of SA’s GDP while employing 60% of the formal workforce.
Small businesses, particularly those in the concept or start-up phase, struggle to find funding in SA because investors are risk averse, he says. This is due to the high failure rate of start-ups, the lack of security available for financiers to compensate for risk and the high gearing required for seed capital.
“This limited funding and support for SMEs often results in innovative business ideas, many of which are developed at tertiary institutions, in incubator programmes, innovation hubs and industry groups, never getting off the ground.”
Van Biljon says funding is often restricted to “safer” businesses such as retail and manufacturing, but that the fund wants to look at a wider range of sectors.
“We currently see great potential and opportunity within the clean energy, agri-processing, biotech and ICT (information and communication technology) sectors, and want to give entrepreneurs the opportunity to develop new products or to take existing businesses to a new level,” he says.
With government wanting to create 5m jobs by 2020, Van Biljon says new and existing SMEs need to be supported and encouraged to grow.
In addition to access to funding, Business Partners will provide support, advice and mentorship to the companies it invests in. — (c) 2012 NewsCentral Media