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Tourism: Business loans to SMMEs

Date posted: 14.05.2014 | Author: Harry Bovensmann

A brand new financing facility has been launched by the Small Enterprise Finance Agency (Sefa) and the Tourism Enterprise Partnership (TEP) to provide business loans to SMMEs in the tourism industry. The purpose is to encourage development in this sector. Sefa has identified tourism as one of the key drivers for job creation in South Africa and features prominently in government priority programmes.

Given the difficulties experienced by SMMEs in gaining access to finance as well as the high rates charged by commercial banks, TEP saw the opportunity to establish the Ikwezi Tourism Facility (ITF). Ikwezi is a R50m ring-fenced, revolving credit facility exclusively reserved for TEP clients and is offered to all business owners, with preference given to black, women, youth and rural owned enterprises. It provides business finance to registered SMMEs in the tourism industry, including bridging finance such as short term financing to facilitate up-front contractual obligations; capital financing, such as the acquisition of new equipment and assets; and business expansion of current assets like buildings.

Although there is a plethora of banks and other development finance institutions in South Africa, access to finance has always been a major challenge to SMMEs. The complaint from SMME operators is that, in addition to the complicated and time consuming red tape involved in the funding application process, the interest rates charged by commercial banks are often punitive and therefore unaffordable.
 
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