If you’ve been turned down for a business loan or can’t afford the high interest rates commercial banks charge, here’s something you need to know: the same banks that rejected your loan application can probably provide you with a cheaper, better funding through their Enterprise and Supplier Development (ESD) programmes.
Many South African entrepreneurs are unaware of the opportunities hidden in ESD funds. Having long been discouraged by the rigid requirements of traditional bank loans, they often avoid banks altogether. Yet, those very same banks actively support small businesses through their ESD programmes, a powerful but often overlooked source of funding.
What Are ESD Funds and Why Do Banks Have Them?
ESD funds are not charity. They’re a legal requirement under South Africa’s Broad-Based Black Economic Empowerment (B-BBEE) legislation. Every company in South Africa that wants to maintain a good B-BBEE scorecard must invest in developing black-owned small businesses.
For banks specifically, this means they must allocate significant portions of their profits to help emerging businesses access funding, training, mentorship, and market opportunities. This is not a favour – it’s a compliance obligation. Banks need you as much as you need them because supporting your business helps them meet their transformation targets.
Here’s the game-changer: ESD funding often comes with lower interest rates, reduced collateral requirements, longer repayment terms, and comprehensive business support that traditional bank loans don’t offer. In some cases, you might even access funding at 0% interest or receive grants that you don’t have to pay back at all.
Why ESD Funds Beat Traditional Bank Loans (and Sometimes Even Beat SEDFA)
Let us explore these two funding mechanisms and understand why ESD funding is different from traditional commercial loans.
Traditional Bank Loans:
- Interest rates between 10% and 15% (sometimes higher)
- Require collateral such as property or vehicles
- Demand excellent credit scores and financial history
- Need at least two years of profitable trading
- Charge multiple fees (origination, service, early settlement)
- Provide money only – no business support
- Strict approval criteria with high rejection rates
ESD Funding:
- Lower interest rates (sometimes 0% to 5%)
- Reduced or no collateral requirements
- More flexible eligibility criteria
- Accept newer businesses and startups
- Include free business development support, mentorship, and training
- Provide access to corporate supply chains and contracts
- Mission is to help you succeed, not just profit from your loan
Compared to SEDFA:
While SEDFA (Small Enterprise Development and Finance Agency) offers excellent government funding, ESD programmes from banks can sometimes be even better because:
- Faster approval times: Banks often process ESD applications in weeks, while SEDFA can take 2-3 months
- Larger funding amounts: Some bank ESD programmes offer up to R10 million, compared to SEDFA’s typical R250,000 cap for popular programmes
- Direct corporate connections: Banks link you to their corporate clients who need suppliers, creating immediate business opportunities
- More personalized support: Smaller cohorts mean more one-on-one attention
- Ongoing relationships: Banks want long-term partnerships, not just one-time funding
Common Requirements Across All Bank ESD Programmes
Ownership Requirements:
- Must be at least 51% black-owned (some require 100%)
- Valid B-BBEE certificate or affidavit
- South African citizens
Business Documentation:
- CIPC registration certificate
- Valid tax clearance from SARS
- Business bank account (preferably with the bank you’re approaching)
- Business plan
- Financial statements (if operating for more than one year)
Business Viability:
- Evidence of market access (contracts, purchase orders, letters of intent)
- Clear revenue model
- Job creation potential
- Supply chain alignment (for supplier development programmes)
What ESD Programmes Will Not Fund
Across all banks, ESD funding typically excludes debt repayment to other lenders, pure property investment or speculation, businesses not yet operating (just ideas), illegal activities, political or purely religious activities, and reimbursement for expenses already incurred.
Conclusion
Billions of rands in ESD funding sit unused every year because entrepreneurs don’t know these programmes exist. Meanwhile, the same entrepreneurs struggle to get traditional business loans at high interest rates with impossible collateral requirements.
You don’t have to choose between struggling alone or paying exploitative interest rates. Bank ESD programmes offer a genuine third option: accessible capital, lower costs, comprehensive support, and connections to corporate opportunities.
Further Information
One of our objectives is to empower small businesses and startups by curating funding opportunities that we come across. Refer to this page for other opportunities.
While formal company registration is not always a prerequisite for accessing funding, it is crucial for formalised entities to maintain compliance. Lack of proper governance will completely hinder any prospects of funding. For guides and articles on governance, please refer to this section of our site.
