Financing your business

johnny_automatic_bag_of_moneyAs cliched as it may be, money does make the world go round. You may have a great business idea but with out the cash to operate it and pay salaries, you will fail.

You can obtain money from various sources:

  • Your Saving
  • Family & Friends
  • Banks
  • Khula Finance
  • Angel Investors
  • Venture Capitolists
  • Crowd Financing
  • Bootstrapping

Let’s look ath these in more detail.

Your Savings:
This may seem the most obvious, but before you refinance your house or touch your savings, you need to think this trough cafefully. What happens if you fail and the bank takes your home? If you use your savings, are you family at risk? What if you become ill? Whilst I am not saying, that you should not use your savings, I am saying you need to before aware of the consequences if you fail.

Family and Friends
Family and Friends are most likely to support you and give you better terms than a bank owuld. Again, you need to be aware what can happen if you fail. Do not persuade your perants to invest their retirement in your business, because they could be left with nothing. Make sure that who ever lend you many is sware of the risks and can afford to lose their investnment.

Banks may seem to be the most obvious place to start, but remember their business is to make money:- for themselves, their shareholders and their investors. If they lend you money, they want it back. There is very little chance of you getting an unsecured loan when strting out in business, they will need you to put up collateral.

Khula Finace
Khula is a Goverment backed Credit Gaurantee for Small Business that does not have the collateral necessary for a Bank Loan.To qualify, the Business needs to be based in South Arica and you need to be a South African Citizen. You will also be expected to be able to contribute towards the finance required.

Angel Investors
An Angel Investor is someone who invests his own money. Like the Banks, he is interested in a return on his money, and will consider his options carefully before investing in any business.

Venture Capitol
Venture Capitolists will manage funds which they will invest in high risk venures that promise big rewards, often taking a portion of the company as part of their investment.

Crowd Sourcing
Crowd Sourcing or Community Funding allows you to request funding online in return for a reward. Maybe you want to hand make chocolates. You an offer your investors a years supply of chocolates. To see this in operation, vistit Start Me Community Funding

Bootstrapping is self funding your business. You fund the business trough revenue earned by the business or income you may have eaarned elsewhere.

You may need to work outside of the business gto make ends meet and only have limited time for your business, but you will find that it is worth it in the end.

Print Friendly