Corporate Youth Jan. / Feb. 2014 | Page 35

business and want to ensure that the business becomes successful. These investors are willing to put money into high-risk businesses with the hopes that in 5-10 years’ time they will receive their returns. Angel investors give businesses the chance to grow, and if the businesses have exceeded the start-up phase, these investors may then invest in a certain level of the businesses and help them exceed the stage the business is currently experiencing. The disadvantage of having angel investors in your business is that you may lose over 50% of your business. According to Entrepreneur.com, your investors may decide that you are not creating a success of the company and can eventually kick you out of your own business as they have more shares. These Angel investors would be able to invest in small start-up businesses, however these small businesses would have to provide a detailed plan of their business to be able to attract these Angel investors. Private Equity Investors These are third party investors also known who come together with the hopes of investing into other businesses. These investors prefer to fund big businesses, however they invest into businesses on a long-term basis, and small businesses have the channels to use this as a means of funding as South Africa has small equity firms. The South African government assists in funding disadvantaged South Africans to open up businesses. The Department of Trade and Industry and other industries such as the South African Micro Finance Apex Fund and the National Empowerment Fund are all created to assist with financial support. Nedbank has a specialist division that deals with small business enterprises. Firstly, the small businesses need to be registered and Nedbank considers a start-up business as a company that has been running for over a period of two years; only then can the business qualify to get start-up financing. The reason for this is that the bank needs to be able to assess the business in order to consider the loan; the period will be enough to see how this business has grown and how much income it has made in the two years. One can however present contracts, future contracts that highlight how much you will be earning as a form of proof to the bankers that you will be able to pay back the loan and that your business is running successfully. Projected finances such as a proper index study in terms of providing income and the expected capital or financial support needed, ensures a better chance in accessing funding. “If you can show us that you are invested in your company, that will make us feel comfortable and assured that we can assist you in growing your company” (Nedbank). First National Bank agrees with the conduct of the other banks that the small business needs to make a profit before it can acquire funding from the bank. Funding a business depends on how much the business already makes. The less money made by a business, the less money the business will receive. Start-up businesses will not qualify to get this business funding. Only existing businesses qualify. In essence, starting a business is not easy and being financed or being invested in is an extremely hard task. Start-up businesses need to have a detailed structured proposal that they can present to potential investors. South African banks require that all start-up businesses have at least 30% of the money they require from the banks. A clean credit record and collateral is required. If a start-up business wants to approach investors, they should make sure that these investors are interested in their craft in order to have a well developing business.