Corporate Youth Jan. / Feb. 2014 | Page 34

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