14 April 2005
Emerging entrepreneurs stand to benefit from a R240-million financial injection into the Umsobomvu Youth Fund’s entrepreneurship programme, which helps 18- to 35-year-olds from previously disadvantaged backgrounds to start up their own small businesses.
The loan by First National Bank (FNB), together with an R80-million commitment from the Umsobomvu Youth Fund (UYF), bring’s the fund for young entrepreneurs, known as the Progress Fund, to R320-million.
The Progress Fund, which offers loans from R100 000 to R8-million, has so far provided over R32-million to 23 start-up businesses across the retail, financial services, IT and media sectors, generating over 800 jobs.
UYF CEO Malose Kekana says the Progress Fund is a good example of a successful public-private partnership.
The original idea was to provide funding to entrepreneurial operations that already held contracts. However, with FNB’s loan, and the signing of a further 10-year agreement with the bank, the Progress Fund would now consider any viable businesses, whether they hold a contract or not, Kekana said.
FNB Enterprise Solutions CEO Duncan Randall said the loans differed from conventional bank loans, which emphasised good track records, strong balance sheets and high levels of security.
“We adopt a risk capital funding approach that focuses more on cash flow and viability”, Randall said.
In addition, UYF and the FirstRand Foundation have each committed R1-million to a technical assistance fund, to provide post-investment mentorship and other business development services to Progress Fund applicants.
The technical assistance fund will provide an interest-free loan with payment holidays to investee companies for the purposes of paying for mentorship services.
Direct loan funding from the Progress Fund will attract market-related interest and other charges.
However, says Randall says applicants to the technical assistance fund will enjoy softer terms for repayment than the actual finance they receive from the Progress Fund.
“At FNB Enterprise Solutions we believe that a key success factor for young businesses is having access to the right advice and guidance from experienced small business advisers”, he said.
Source: BuaNews
