Finding The Right Funding For Your Business

Limited information and education around funding options can be a major challenge for many small businesses. And high inflation rates and limited support do little to alleviate the stress around finding the right funding.

Thankfully, small to medium business’s contribution to the economy and potential for job creation do not go unreconised and there are various funding models available suited to SMEs and entrepreneurs.

In this article, our friends at web hosting provider *xneelo outline some of the resources and options available to South African entrepreneurs.

Bank loans

Depending on how much capital you’ll need, the best place to start is with your bank. Most banks offer finance through business loans. These can be secured (requiring collateral) or unsecured (no collateral required.)

It’s easier to be approved for a business loan if your company is already operational. Having an existing purchase order is even better.

Government grants

Unlike a bank loan, you don’t need to repay a government grant. But this doesn’t mean you’re getting money for free – you’ll need to follow a very strict and lengthy process that may only result in partial financial funding.

When applying for a grant, it’s important to find and contact the best department for your business. You can find more information about the types of government grants available here.

Embedded finance

Rapid digital transformation during Covid saw a rise in the availability of embedded finance, a form of financial product offered by both financial and non-financial companies as a digital or in-app offering.

Embedded finance is a seamless way to apply for finance with little effort. This is because APIs and platforms like Plaid Exchange assist to verify identification and check credit history quickly. Standard Bank is one local financial institution innovating in this space.

Crowdfunding

With crowdfunding, small amounts of money can be collected from a large number of people to help fund a new business. Local business Steel Cut Spirits was able to successfully raise more than R1 million through crowdfunding.

There are a number of local crowdfunding platforms, such as BackaBuddy and Thundafund that can help you raise funds in exchange for rewards or equity in your business.

Venture capital

A venture capitalist is an equity investor, whose main focus is to make money. They usually look at businesses that are built for growth and will provide good returns on their initial investment. Typically, they want to sell their shares in around five years for 10 times what they initially paid.

You can find a list of venture capital firms here.

Angel investors

This type of investor isn’t financially motivated and is often a friend, family or mentor who gives a one-time investment to help get a business up and running. Angel investors usually get involved during the early stages of startups and their investment is in exchange for ownership equity.

Have a look at the Angel Investment Network, which makes it easier to connect with potential angel investors or entrepreneurs.

Business loans

Existing businesses that require additional cash flow have the option of approaching business loan providers such as Retail Capital. Certain loans don’t require collateral, but do require that your business meet certain criteria such as a minimum trading period and turnover.

Always read the terms and conditions and funding requirements first to ensure your business is applicable before applying.

Go in prepared

No matter which type of funding you are applying for, its important to be as prepared as possible, especially when it comes to government grants. Have a clear, concise and focused proposal that enables investors to quickly ascertain the risk and reward of what you are asking money for. They should be able to determine exactly how much money you need by looking at the project scope, its timelines and its deliverables.

It’s also important for your website to look professional and mirror what’s included in your funding proposal. Investors want to be able to see what you offer, what your values are, and read about your team. Managed WordPress Hosting is a great option for small businesses as you have all the tools you need, including ready-to-use Starter Sites, that allow you to create a professional website quickly without needing to hire expensive designer or developer expertise.

Most importantly, do your homework. Look for funding options that will work for you and your business. It’s your passion and time on the line, so make sure your financial partner is someone you can see yourself working with for a long time.

This advice was compiled by our friends at hosting provider xneelo. A version of this article previously appeared here.

*Please note that xneelo is not a financial service provider.