Entrepreneurship In South Africa – Quick Guide To Funding

                  

Show Me The Money

My line of work gives me an opportunity to interact with aspirant entrepreneurs and startup businesses. A look into the lives of these gutsy individuals is humbling and inspiring. The entrepreneurial journey is tough. The various conversations I engage in reveal that building a business is fraught with countless challenges. Top on the list of challenges is access to finance.

The funding dilemma is one you might be facing now or might encounter at some point in future. The information contained in this quick guide to funding is meant to give you guidance whenever the need to raise funds arises.

First Steps

Know Yourself – Conduct A Self Assessment

What are your strengths,

What are your weaknesses,

What are you passionate about

What are your personal financial goals – Do you have a retirement plan, what is your target net worth

Know Your Business – Product And Service Evaluation

Is it easy to sell or market

Is it seasonal

Target market

Profit potential

Turnover rate,

Start up requirements – are there any regulatory or compliance issues to be addressed prior to launching the business.

Personal financial status- Take a look at your assets, income, expenses, liabilities, credit record.

Know your Industry- Market Research

Who are your competitors?

What Industry-specific regulations do you need to familiarise yourself with?

Are there a lot of barriers to entry into the industry?

Is the Industry growing or in decline?

Types Of  Financing

Funding requirements differ from company to company. These requirements would be determined by the growth stage a particular company is in and the purpose for which the funding is required.

There are various organisations that provide funding for startup, operational expenses and for expansion. Some are specialised and focus on a niche market while others invest in or finance any viable business.

Some finance options that a business can consider when looking to raise funds are listed below:

• ·        Savings /personal funds – bootstrapping (my favourite, for startups especially)
• ·        FFF friend family and fools
• ·        Angel investors
• ·        Crowdfunding
• ·        Equity finance
• ·        Credit card / bank overdraft
• ·        Financial institution loans
• ·        Government grant  
• ·        Supplier credit
• ·         Customer prepayment
• ·         Debtor finance/ invoice discounting
• ·         Order finance
• ·         Sponsorship
• ·         Donations
• ·         Joint ventures
• ·         Leaseback
• 
  

What do funders look for?

·         Is business backed by a solid plan?

·         Does owner and team have skills to build and manage the business?

·         Is the business model sustainable?

·         Is there collateral to cover the funding?

·         What is the repayment plan and period?

·         Is the business registered with relevant organisations CIPC, SARS, etc.?

Reason why most funding applications fail

·         Incoherent numbers – your numbers need to make sense

·         Bad bookkeeping / record keeping

·         Wrong financier approached /wrong finance option applied for

·         Badly constructed business plan

·         Non compliance SARS/ CIPC –SARS Tax returns and CIPC

          annual returns can negatively affect an application for 

          funding.

·         Risky business and no contingency plan

·         Inability to effectively pitch business idea

·         Non-existent or bad credit record

·         Non disclosure of critical info i.e. other material debts, 

          criminal / bad credit record, other directorships, false      

          qualifications declared by director.

What To Do When Your Business Needs Funding

·         Update your business plan

·         Fine tune your financial forecasts

·         Perfect your presentation skills

·         Develop good relationship with your banker

·         Grow your network

There will be follow up articles that will go into more detail about the various types of funding as well as lists of financial institutions that offer business funding . The articles will also give practical tips on how to get your business ready for the funding process.

A book that has a list of these institution is available for free. To request a copy send an email to cmanonga@yahoo.co.uk or whatsapp +27768465542 .

Attend a workshop on funding for small businesses at a venue near you. Like our Facebook page Buildyobiz Xlr8r to stay up to date

   `