What if you don't have collateral?

It can be very frustrating to be approved for finance, but then not be able to access the money due to a lack of collateral. 

The Absa Thembani International Guarantee Fund exists to help small businesses that do not have collateral. It provides a letter of guarantee to the bank from whom you will be borrowing the finance. Details of how this fund works are provided below.

Absa Thembani International Guarantee Fund

This fund exists to provide collateral guarantees for previously disadvantaged small business owners. You would need to apply for a loan and be approved for finance by one of the major banks. Then you can approach Absa to fund the collateral guarantee for this loan. They only provide guarantees for collateral amounts of R50 000 to R10 million.
If you are approved for the guarantee, you will be charged an initial fee of .05% of the value of the collateral and an interest rate of 3.3% of the collateral amount.
Eligibility criteria:
  • The entrepreneur(s) must be South African citizens.
  • The ownership must be at least 51% black.
  • Enterprise proposal must prove to be viable and create sustainable jobs.
  • The total guarantee requirement by the enterprise should not exceed 75% of the credit facility required and, not exceed R10m.
  • Preference is given to rural, or women, or youth-owned enterprises.
  • Loans guaranteed to legal entities (e.g. CIPC registered companies, registered co-operatives as opposed to individuals).
  • You must have an ABSA banking account or be prepared to move your business account to ABSA.
If you fit these criteria, then contact your nearest Absa branch to discuss how you can access this fund.

Government agencies

Some of the government funding agencies, for example, IDC and NEF, will try to work with you to reduce the amount of collateral required for the business loan. Make sure you ask whether they can help you if you are lacking the collateral needed for the loan.