You have the business idea. You have the determination. You have created the business plan. Now you only need the funding. Here are six places to go for funding.
1. Your own savings
The first place you can look for funding is in your own personal savings account. If you have the funds available, it is best to use them because you will not have to give some of your business away to an investor, or put up surety for the loan you applied for
2. Your family or friends
When asking friends or family, it is important to draw up a contract so that both parties know what each one commits to when you take a loan. The one danger of loaning money from your friends or family is that you could have an ugly fall out if you do not pay the loan back in time or something goes wrong with the business.
3. Bank finance
If you decide to take out a bank loan, it is important that the equipment or idea you are financing will not be obsolete before you have paid off your bank loan. There are three ways to be financed by the bank. Firstly, you can apply for an overdraft on your current bank account. Secondly, you can get a bank loan but these are only given to businesses with a certain amount of turnover. Finally, you can apply for asset finance where the bank will loan you money to finance equipment and vehicles which you need to run your business.
4. Angel investors
This type of investor is a high net worth individual who is willing to invest some of their money into a viable business idea. When they invest in your company, they will expect to have a share in your business and be part of the decision-making process. The benefits of having an angel investor who has been prominent in your field is that they can give much needed advice about how to run a business from the experiences they have gained from running their own business. When you apply for angel investment you will have to have a clear business plan and also be able to understand the potential pitfalls you may experience in your business. The drawbacks to having an angel investor are that you will need to report to them regarding your business progress, and you will have to involve them in your decision-making process.
5. Government grants
The South African government understands the importance of supporting small business and they have made many grants and much funding available. When applying for this option you will need to have a clear business plan and be able to fulfill the parameters of the funding or grant. The Department of Trade and Industry have different funds available which support the small business entrepreneur. You can learn more about the funding available by visiting the DTI website.
Another method of funding to consider is crowd-funding. There are a variety of websites available where you can ask people to fund your business idea or the expansion of your business. With crowd-funding, people will donate money according to different categories and you will give them various incentives according to how much money they have donated. You will need to be a bit social media savvy as you will need to promote the request for crowd-funding to everyone you know.
By following one of these funding routes, you will be well on your way to building your business ideas into a concrete business.
Proudly brought to you by the NSBC.