So, you have found your passion and now want to start a small business? One of the first steps to fiscal success is to look for simple ways to finance your new venture. This might sound difficult and you might not know exactly where to start, but it can be done with the right know-how and tips.
You could start by looking for small business funding online. There is also the option of attracting an “angel investor” or crowdfunding, but if you are just starting out it is best to keep things simple. Below is some useful information on simple strategies to finance your small business.
Look for small business-specific loans
There are financial companies in South Africa that are geared specifically towards helping small businesses. They believe that small businesses are making a difference in the country and are building a better solution by striving for excellence. Simply put, these financial companies want to help you reach your goals of success.
You will have to meet certain criteria for some of these companies, such as having at least three of the most recent months of bank statements for the company to scrutinise. You will be scored according to the performance of your company, but if you are just starting out, the process will be slightly different. If you look for small business funding online, you will need to find out the stipulations, such as having been in business for at least a year, earning R500 000 annually and being based in South Africa.
Try out crowdfunding
Through crowdfunding sites such as Indiegogo or the South African version Candystick, you will have access to thousands of investors who could help fund your business. One of the benefits of crowdfunding is that many of the contributors are not necessarily interested in acquiring equity in your company but simply want to get their hands on your product.
You will need to ensure that your crowdfunding campaign will attract investors and contributors. An effective way to draw the attention of investors is to offer an incentive, such as sending the first 100 people to contribute funds a sample of the product you are planning to make in your small business.
Be sure to read all the terms and conditions to find out if you have to pay any fees to the crowdfunding website to join or maintain your campaign.
Run a pre-sale campaign
If you already have a product, you can run a pre-sale campaign to earn funds to finance your small business. This way, you can keep the entirety of the money you earn and use it to build your business and make more of your product for new and returning customers.
A pre-sale campaign means that you will sell prototypes or early versions of your product through a PR (public relations) campaign, attracting new customers and benefitting from the traffic that it will draw to your website. You might end up selling all of your prototype products, which is fantastic as this revenue will allow you to build more and improve your profits. Be sure that you have enough product for the sale or you could arrange an exclusive event for a select few customers before you the official release of your product.
Ask friends and family
This might not sound like the best idea, but asking friends and family to invest in your business can often lead to success. You could ask a close friend or a family member who supports your vision to provide a percentage of money to help fund your business, with strict plans in place to repay them with interest.
Before you approach anyone asking for a loan, you will need to have a sound business plan in place, as well as a legally drawn up contract stating how and when you plan to repay the loan. This will reduce the likelihood of unpleasant surprises and shows your investors that you take their money and trust seriously.
You will need to seriously consider how the arrangement will be structured. Are you offering them an investment in your small business or is it a loan? This will affect the repayment options as well as the risk involved for them.
Explore all options
As a small business, start by looking for small business funding online and for small business loans in South Africa, then move onto the more creative outlets. If you explore all of your options, you will soon find the perfect solution to build your small business.
The best way to start is with a small business loan, as this is the most reliable way to gain funding and use other ways as secondary sources when the time comes to grow your venture. Remember to have a business plan in place first before you apply for any loans, whether it is from friends, family or a financial institution.