Funding continues to be one of the top challenges facing South African start-ups and small businesses. Acquiring business start-up funding can make-or-break your business, but is your concept ready for funding? What’s the best type of small business funding for your start-up? What do you need the new business funding for exactly?
“The truth is, finding the money to run a start-up requires a lot of preliminary planning, regardless of whether you’re going to pursue outside funding or choose to bootstrap your first few months,” says Jared Hecht, CEO of Fundera, an online marketplace that matches small business owners to the best possible lenders.
Are you ready for funding?
“If you’ve been operating for a while and need money to scale, which is when you’re most likely to get hold of funding, you should be able to prove that you’ve been keeping records and have a good handle on the financial state of your business. You need to know your numbers,” advises Matsi Modise, Managing Director of SiMODiSA.
“You also need a good understanding of your industry. You need to be able to talk intelligently about the prospects for your business. It’s important to show that your business truly can scale. Moreover, investors don’t want to hear over-optimistic projections — you need to be able to back up your claims,” she says.
Before you wander down the rabbit-hole of small business funding, you should first determine whether your business is ready for funding. Here are a few identifiers that indicate whether your small business needs funding:
- Your business idea needs a customer base: Does your product or idea deliver a solution to a problem that those potential customers are facing?
- Your product works: Very few lenders will feel comfortable investing into just a concept, no matter how enticing.
- You’ve compiled a business model and business plan: Your business model and plan provide proof, both to yourself and to any potential lenders, that your business idea is practical and operable.
- You have a financial plan: Your potential investor will want to see how you plan to use your money, exactly how much you need and why you need it.
Here are a few more determining factors as to whether your business is ready for funding. Some insightful techniques Elon Musk’s career can inform you about getting business start-up funding.
Alternatively, if you’ve realised your start-up isn’t quite ready for new business funding, here are a few pointers to get there from a small business that secured investment on the inaugural episode of M-Net’s Shark Tank.
Here are 10 ways to get funding for your new business: