SEFA

SEFA is a development finance institution in South Africa whose primary function is to offer financial services and products to eligible small, medium, and micro-sized enterprises (SMMEs) and cooperatives in diverse sectors of the economy, such as construction, agriculture, mining, green industries, manufacturing, and services.

It operates as a subsidiary of the Industrial Development Corporation Limited and functions as an implementing agency of the Department of Small Business Development.

The agency was established on April 1, 2012, after Khula, the South African Micro-Finance Apex Fund, and the IDC's small business funding unit merged. SEFA has a national presence with its headquarters in Centurion, Gauteng, and regional offices in all nine provinces of South Africa.

SEFA's mandate: Empowering South African SMMEs with sustainable finance

SEFA's goal is to facilitate the emergence, expansion, and endurance of small, medium, and micro-sized enterprises (SMMEs) and cooperatives in South Africa, with the aim of reducing poverty and generating employment. The organisation aspires to become the primary driver for the advancement of SMMEs and cooperatives that are viable over the long term by delivering financial services.

Its purpose is to provide efficient and sustainable access to funding for SMMEs and cooperatives across South Africa, which entails providing credit facilities, loans, credit guarantees, institutional strengthening, strategic collaborations, and creative financial solutions.

SEFA's values and guiding principles revolve around being swift and decisive, driven by a passion for development, committed to integrity and transparency, and continuously innovating.

SEFA's partnerships and governance structure

SEFA is managed by a board of directors and executive management responsible for supervising its activities and plans.

The agency has numerous collaborators, such as the European Union, the Black Business Council, the University of Johannesburg, the Industrial Development Trust, the South African Informal Traders Association, and the Department of Small Business Development, among others. These collaborators are essential to the success of the agency's clients' ventures and to realizing its vision.

A term loan is a financing option for businesses that need cash to acquire movable assets, such as office furniture and fixtures, which cannot be identified by serial numbers.

It differs from asset financing, which is used to acquire movable assets that have serial numbers, such as vehicles or equipment. The term loan is a type of fixed-term loan that provides businesses with the funds they need to purchase such assets.

Benefits of using a term loan for fixed asset purchases

One of the benefits of a term loan is that the cash can be used to purchase fixed assets, such as equipment used in the production process. Additionally, assets acquired through a term loan can be used as security for the loan.

This means that SEFA, the South African government's Small Enterprise Finance Agency, can use the acquired assets as collateral to secure the loan.

Understanding the repayment period and considerations for term loans

The repayment period for a term loan typically ranges from 12 to 60 months. During this time, businesses are required to make regular payments to pay back the loan.

As with any loan, it's important to carefully consider the terms and conditions before committing to a term loan. Businesses should ensure that they have a solid repayment plan in place and that they can comfortably meet their repayment obligations.

Eligibility criteria for SEFA's term loan in South Africa

The eligibility criteria for term-loan are different for natural and juristic persons and are stated as follows;

For individuals to be eligible, they must possess a valid South African ID, while juristic entities must be legally established and have a fixed physical address. The operations financed by SEFA must be carried out within South Africa, and the business must be controlled by a South African citizen who has a valid ID.

During the loan period, the company must have a workforce comprising at least 95% South African citizens who possess valid IDs, and at least one member/shareholder must be actively involved in the enterprise. The project must have the potential to generate development impact, and the business should be both commercially viable and sustainable, with a particular emphasis on loan repayment capacity.

To qualify for the SEFA's term loan facilities, juristic persons must have black ownership of at least 51%. Entrepreneurs can reflect risk-taking by contributing their own financial resources, equity, and personal sureties.