Arguably one of the biggest battles of starting a new independent venture is having to source funds to fire up the growth of the business. Fortunately, there are various ways to get funding for your business if you are lucky enough to fulfil all the requirements and find the right place. These are the five most common and convenient ways of funding your business in South Africa:
1. Government funding
Government funding can be an advantageous method to get the assets you need for your business. However, you should keep in mind that there is a rigid set of criteria you need to meet, a ton of documents and most probably a long delay. It is somewhat justified in that, with approval, you do get the required funding for your business. Government funds are mostly granted to businesses which promote South African culture, build up the economy and the betterment of the black community. Different government fundings include:
• SA SME Fund, supported by larger corporates
• Automotive Investment Scheme (AIS)
• Clothing and Textile Competitiveness Improvement Program (CTCIP)
• Critical Infrastructure Program (CIP)
• Business Process Services (BPS)
• Film Incentive Program
• Capital Projects Feasibility Program (CPFP)
• National Youth Development Agency (NYDA)
• Support Program for Industrial Innovation (SPII)
• National Empowerment Fund (NEF)
2. Investor funding
Finding investors has now become easier because many investors are eager to put resources into new business ideas. They utilise their own funds into private ventures and new businesses with the expectation that the investment will be very profitable.
There are three main types of investor funding for start-ups:
• Angel investor
An angel investor or informed investor is an affluent person who gives funding to a business start-up in return for private equity or convertible shares.
• Impact Investors
Impact investors put funds into businesses to create a quantifiable, advantageous social or natural impact nearby a monetary return.
• Private Equity Funding
Private equity comprises of cash from different investors that are combined and afterwards put into different small businesses.
A private equity investor usually invests in:
• A business with vision, drive and vitality with the potential to turn into an independent company.
• A great business plan with professional forecasts and strategies.
• A business with information on the target market and the potential to develop inside that market.
• A unique and one of a kind product or service with many scopes.
3. Bank funding
If you approach a bank for funds, then you will be required to arrange some things first. The essential component is a wholly understood and thorough business plan supported by economic projections. You will also be required to give a full arrangement of financials for them to review and evaluate. Eventually, after exhausting all your documents and business details, you will have to understand the sorts of credits accessible and which will be the most appropriate for your business needs.
Like Cashflow funding, a moderately new scheme is crowdfunding which is an energising method to collect funds. It works like angel investment. However, numerous people can vow differing sums to the business in return for a premium, equity and other benefits.
5. Funding by Supplier Development or Enterprise Development
Broad-Based Black Economic Empowerment (BB-BEE) act regards companies for funding and investing in the development of their supplier or smaller enterprises in their industry. This is a useful tool for companies that are black-own to get both the financial and non-financial support from larger organisations
It’s not an easy battle to fund your venture, but it is definitely possible. Keep pushing forward and plan ahead as best you can.
Do you have a business idea and need help getting funded? Contact Outsourced Finance and let us help you get through all the red tape!