Business Funding
Before launching a business, its 1st necessary to establish your financial requirements. Adequate start-Up capital is critical to any fledgling enterprise and failure to plan for this is a major cause of small business failure. Before you open for business, it is critical to plan how much cash you will need. You should also ask yourself what you need money for; how much you need; does the amount allow for unexpected developments; how and when you will repay the money; can you afford the cost of borrowing; and what is the outlook for business in general and your business in particular.
Initially, a financier is likely to ask three questions:
- How will you use the loan?
- How much do you need to borrow?
- How will you repay the loan?
By carefully planning your financial projections (see business plan section) you will successfully negotiate the situation of future shortages of funds. Borrow carefully in order not to overextend yourself.
SOURCES OF FINANCE
There are a number of sources of finance available to the small business entrepreneur. The e may include:
- Formal Financial Intermediaries such as:
- Provincial Development Finance Corporation
- Commercial Banks
- International Financial Institutions
Informal Financial Intermediaries such as:
- Khula Retail Financial Intermediaries
- Stokvels
- Non-Government Organisations (NGO’sl)
Other
- Family and friends
- Trade credit. Remember, that if trade credit can be arranged and if you do not over extend yourself, this is regarded as a good form of financing as it is normally interest-free: The supplier “builds” his return into the price of the article anyway, so use trade credit where possible.
It is important to shop around for finance in order to get the best possible deal.