STARTING A BUSINESS? – HOW TO GET FUNDING

January 13, 2019 Hansie Britz No comments exist

                                           

 

BUSINESS PLANS 

Your business plan is an essential piece of the funding puzzle, explaining exactly how much money you need, where it’s going to, and how you will pay it back as well as how long it is going to take for you to earn it back.

Investors will first look for a summary or investors pitch; and if you get through that screening, they’ll want to see a business plan for the process of due diligence. Everyone you talk to is going to expect you to have a business plan available.

WHERE TO FIND FUNDING 

The process of finding the money you looking for should match the needs of your company or business. When you look for money will depend a lot on your business or company and the kind of money you need.There is a big difference between a high- growth internet – related company looking for venture funding and a local retail store looking to finance a second location or a new startup business.

TYPES OF FUNDING AVAILABLE 

1. Venture Capital 

Venture Capital is frequently misunderstood. Many start up companies complain about venture capital companies for failing to invest in new ventures or risky ventures. This is not the case. The people we call venture capitalists are business people who are trusted with investing other people’s money. They have a professional responsibility to reduce risk as much as possible. They should not take more risk than is absolutely necessary to produce the risk/return ratios that the sources of their capital risk of them.

Venture Capital professionals look for businesses that they believe could produce a huge increase in business value within just a few years. They know that most high-risk ventures fail, so the winners have to win big enough to pay for all the losers.

2. Angel Investment 

Although angel investment is a lot like venture capital, there are important distinctions. First, angel investors are groups or individuals who invest their own money. Second, angel investors tend to invest in companies at earlier stages of growth, while venture capital typically waits until after a few years of growth, after startups have more history. Like venture capitalists, angel investors normally focus on high-growth companies at early stages of development. Don’t think of them for funding established , stable, low-growth businesses.

3. Commercial Lenders

Banks are even less likely than venture capitalists to invest in, or loan money to, start up businesses. They are, however, the most likely source of financing for established small businesses. A business that has been around for a few years generates enough stability and assets to serve as collateral. Banks commonly make loans to small businesses backed by the company’s inventory or accounts receivable. Normally there are formulas that determine how much can be loaned, depending on how much is in inventory and in accounts receivable.

A great deal of small business funding is accomplished through bank loans based on the business owners personal collateral such as home ownership.

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4. Other Lenders 

Aside from standard bank loans, an established small business can also turn to accounts receivable specialists to borrow against its accounts receivable. The most common accounts receivable financing is used to support cash flow when working capital is hung up in accounts receivable.

Another related business practice is called “factoring”. So-called factors actually purchase obligations, so if a customer owes you R100 000 you can sell the related paperwork to the factor for some percentage of the total amount.

Various other private investors or government lenders are also available for small business funding, each one with their own criteria and documentation required.

5. Friends/ Family Funding 

f your parents, siblings, good friends, cousins, and in-laws will invest in your business, they have paid you an enormous compliment. In that case, make sure you understand how easily this money can be lost, and that you make them understand this as well. Although you don’t want to rule out starting your business with investments from friends and family, don’t ignore some of the disadvantages. Go into this relationships with your eyes wide open.

Maybe, your idea and your situation is a better fit for “crowdfunding” – that is, creating a profile and pitching your business idea or product on a site like “Kick starter”. In fact, this method of raising money has become so popular that there are dozens of crowdfunding sites to choose from, all offering different terms and benefits.

IF YOU NEED HELP IN ANY OF THE ABOVE AREAS OR WITH A WELL – STRUCTURED, BANKABLE BUSINESS PLAN CONTACT US NOW AT – 084 583 3143 OR money@global.co.za AND GET A PROFESSIONAL SERVICE

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