You have a great idea. You have written a business plan. You know the market and that there is a demand for your product or service but there are no funds. You wonder how you can find the financing you need for your big idea. Before you look at the financing options, it is important to go through these two questions:
1. Do you have a business plan?
It is important to have a business plan to show your potential investor that you are serious about your business. This plan should include a financial forecast.
2. What do you want to finance?
When considering what you want to finance it is important to look at what you need rather than what you want. By knowing your needs, you will be able to state clearly to the lender the reason for your request and you can make sure you get the correct funding. It would not make sense to take out a long term loan on equipment which would become obsolete before the loan is paid off.
Here are a number of ways to finance your great idea:
Look at the funds which you have available. They could be savings, credit cards or cash from a sale of an asset. You need to be careful if you choose to use your personal credit card to fund your business. If you default on the payment your personal and business assets may be seized so think very carefully before you use your personal credit card to fund your business.
Family or friends
You could pitch your idea to your family or friends and see if they would like to join you in your venture. You need to make sure that a contract is in place to ensure everyone is clear about their responsibilities with regards to the loan you will receive. This could help down the line that there is no family or friendship feuds because of an unpaid debt.
These are wealthy entrepreneurs or executives who have business experience and choose to invest their personal funds into your business. Angel investors would want shares in your company or they would want the loan paid back at some stage. The advantage of having an angel investor is that they could act as a mentor and assist in building your business.
In this method, you need to have a great elevator pitch and be social media savvy. By marketing your idea on one of the crowdfunding websites people are able to contribute a certain amount to your idea. The advantage of this method is that you will know if there is a market for the product you are creating. Furthermore, by creating incentives at different value levels you will encourage people to invest in your dream.
This is the most traditional method of getting money for your business. Banks have become aware of the need for small business banking and there are various packages available. Banks would also need to know your bank history so it might be a good idea to open a business account at the bank which you are already a member of.
There are many government grants available in South Africa to assist entrepreneurs to reach for their dreams. By going to the Department of Trade and Industries website you can learn about the different types of grants available for different industries.
Find the best financing option and take your business dreams to the next level. Through hard work and perseverance, you will be well on your way to making your entrepreneurial dreams come true.
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