The Financing Options for New Small and Medium Enterprises in South Africa

Abstract

New SMEs are critical to the reduction of the high rates of poverty and unemployment in South Africa. The failure rate of new small and medium enterprises (SMEs) is very high. Access to finance is one of the major constraints to the survival of new SMEs in South Africa. The purpose of the study was to examine the traditional and innovative financing options available to new SMEs in South Africa. The study analysed the traditional sources of equity and debt such as business angels, venture capitalists, commercial banks, trade credit and government agencies. The study suggested that one of the innovative ways to improve access to finance by new SMEs is crowdfunding. There is the need to provide a regulatory environment that will support the growth of crowdfunding in South Africa.

DOI: 10.5901/mjss.2014.v5n20p748