There are a variety of options that entrepreneurs can take to start their businesses. One
can get funding from investors. An investor is a
person who grants capital to a company and
expects a financial benefit. It is perceived as
a source to increase and multiply their money.
“Investors have risk tolerances, capital, styles,
preferences and timeframes. For instance,
some investors prefer very low-risk investments
that will lead to conservative gains” (Investopedia). However, some investors prefer to take
the risks hoping that these risky investments will
provide larger returns.
accurate financial records and cannot balance their books.
Cash flow
It is important that you have sturdy cash flow
as banks need to know and be satisfied that
one needs to have a flow of income as the
banks need to be assured that the business
management skills of that company are liable and strong before they approve of
granting these small businesses loans. When
one applies for a loan, banks would require
that you have collateral, a clean record and
Funding for your business is the act of borrow- flexibility.
ing money to assist in the day-to-day running of
the business; it is a way of borrowing money as
a means of capital from the bank.
Collateral
Small start-up businesses can approach private investors or venture capital firms to receive funding. Most South African investors are
looking to invest their funds into new innovative
businesses that formulate and present a welldetailed proposal, which consists of statistics,
figures, and a plan that shows potential growth
of a successful long-term period that will certainly benefit them if they were to invest in
the specific business. Most start-up businesses
however, do not want to give away shares or
stakes into their business, so the private sector
investors should be taken into consideration.
Why Banks Don’t Loan the
Start-up
This is a means of providing a sense of security to assure the bank that the business
will be able to pay its loan back. It is used as
a means to take note of all the owners’ assets and is an agreement that they can be
taken to pay back the loaned money. This
collateral ranges from housing, investments,
and savings. It is unfortunate that when one
has a small business, banks tend to require
more collateral to those who have bigger
businesses.
Credit record
A bad credit record will most likely decrease
your chances of acquiring a loan from the
bank; regardless if the debt dates back
a while, it is still noted and can tarnish the
In this article, four reasons why banks of South chances of acquiring the loan (Standard
Africa are guarded in their permitting of loans Bank).
to individuals who own small businesses are explored.
According to Nedbank and First National
Bank, debt finance is not given to businesses
that do not have capital already. Two years
of business and a minimum of 30% of the
required loan should be in the company to
We must take into account that banks do not
finance businesses; their job is to finance the convince the bank that there is some sort of
operating assets and working capital of busi- income.
nesses. If a business owner has not contributed
any or little capital into the business then banks
will be cautious. If a small business is undercapitalized, then receiving a loan will be extremely difficult. Many small Ѽ