Background: Small and medium enterprises (SMEs) in South Africa and globally struggle to gain access to external funding. The current lending instruments used by the banks are more suitable for large enterprises than for SMEs. Financially constrained SMEs are less likely to contribute to economic growth and job creation. Small and medium enterprises in South Africa are expected to create 90% of the 11 million jobs as per the National Development Plan.Aim: The objective of this study was to deliver innovatively designed funding mechanisms through which improved access to external funding can be achieved.Setting: Participating stakeholders in this research were entrepreneurs and suppliers of funding, policymakers and experts.Methods: The purposive sampling method was used in this study where 24 in-depth interviews were conducted, and 160 survey questionnaires were recorded. Mixed-methods approach was used to incorporate both qualitative and quantitative techniques. A literature review related to entrepreneurship and capital structure theories was conducted. Thematic and statistical graphical data analyses were applied in both the qualitative and quantitative data, respectively.Results: The critical findings of this study are the blended SME funding model and the SME risk reduction model. Designing the lending instruments in a way that blends both private and public financial resources increases the risk appetite on the side of the private lending institutions.Conclusion: The proposed model requires more improved public–private partnerships. Furthermore, the findings include the need for supportive regulatory framework and embracing alternative emerging technology-enabled funding options.