Connect with us

How to Guides

Gearing Up For Funding Applications: What Does It Take For A Small Business To Be Funding-Ready?

This article provides insights into what entrepreneurs need to have in place before putting themselves in front of prospective funders or investors.

Donna Rachelson

Published

on

business-funding-strategy-in-south-africa

wealthy-saving-money

Find the most fitting funding channel for your business

Entrepreneurs need to thoroughly research and select the most appropriate funding channels for their business. They must establish the specific criteria in order to apply.

Funding institutions, especially larger Development Finance Institutions (DFIs) such as the Department of Trade and Industry (DTI) in SA, have numerous categories of financial and business support for entrepreneurs. So spending time finding the most appropriate options for your business is vital.

Bear in mind that

  • Some only support small businesses in a particular industry sector – typically, priority economic sectors
  • Others only support businesses at a particular stage of growth
  • Some just provide just capital
  • Some require the entrepreneur to pay back the funding over time
  • Others do not (usually grant funding)
  • Some provide mentorship and get involved in growing the business together with their financial investment.

Related: What Funding Options Are There For Entrepreneurial Businesses In South Africa?

Paper work

applying-for-funding

You should be prepared to spend a lot of time getting all the necessary documentation together. Depending on the criteria specified, some or all of the following may be required for the funding application:

  • Proof of type of company e.g. CIPC registered company, closed corporation, sole proprietor, etc.
  • Proof of ownership and shareholding
  • Proof of address
  • Proof of SA citizenship
  • Certified ID of all directors/ members/ staff
  • Certified financial statements
  • Management accounts
  • Valid SARS tax clearance certificate
  • Other SARS documentation
  • VAT registration document (where applicable)
  • Bank statements.

The pitch to your prospective funders

When pitching for funding to any institution or individual, there are key criteria that Seed Academy recommends to its entrepreneurs:

  • Be extremely conservative in the financial projections presented to the prospective funder
  • Be fully prepared to explain exactly where the figures are derived from and be able to support this with evidence
  • Show your funders that you have an in-depth understanding of the business and the competitive environment in which you are operating
  • Be able to answer questions such as: What sets your business apart from other small businesses offering similar products or services? What are your differentiators? What can you provide that no other business can?
  • Know what the expected return on the investment for the prospective investor will be
  • Be extremely clear on the expected repayment period and terms
  • Have a proof of your concept or your most viable product
  • Be able to show an existing and ideally, a future customer base.

Related: Small Business Funding In South Africa

Engage your audience, don’t bore them

Try not to exceed 15 slides in your pitch presentation. Don’t bore your audience! They will be sitting through many presentations for the same pot of money. Practice your presentation beforehand.

The guidelines allow investors to see that the business idea has been thought through, that the business environment has been considered and that the entrepreneur is willing to sacrifice to make the idea work. This will serve to allay some of the fears of investors and enable the entrepreneur to create a strong first impression that could open the doors for meaningful funding discussions.

Entrepreneurs must be able to show their prospective investors that they are equipped personally and professionally to be a determined business owner.

A good business idea is vital, but the entrepreneurial journey comes with many unforeseen challenges. You need to demonstrate that you have the tenacity and determination required for success.

Entrepreneurs are the job creators of the future, don’t give up

Patience is critical. If a funding application is not successful first time around, learn, fine-tune your approach, and try again.

At Seed Academy, we believe entrepreneurs are integral to economic growth and are the job creators of the future. With the right training, support and funding they can build successful, sustainable businesses. Entrepreneurs need to be equipped to build successful, scalable business and to become the job creators of the future.

Donna Rachelson, branding and marketing specialist, is the author of three books.She has held marketing director positions in blue chip organisations and has a solid business education, including an MBA and is a guest lecturer at GIBS .As a successful businesswoman and investor in businesses, Donna is passionate about empowering entrepreneurs and women, uplifting them with her unique brand of inspiringly practical, strategically results-driven guidance. She is currently Chief Catalyst at Seed Academy- a training and incubation ecosystem for entrepreneurs.

Advertisement
Comments

Company Posts

SAB Transforms Supply Chains

Supplier Development Programmes grow black-owned suppliers and create jobs.

South African Breweries (SAB)

Published

on

south-african-breweries

The South African Breweries (SAB) has invested more than R200 million into creating an inclusive supply chain that incorporates black-owned and black women-owned SMEs through its supplier development programmes, SAB Accelerator and SAB Thrive. In addition, more than 100 jobs have been created through these efforts.

SAB Accelerator and SAB Thrive aim to create a diversified and inclusive supply chain by supporting the growth of black-owned suppliers through business development support and funding. The programmes are two of four entrepreneurship development programmes run by SAB to help create 10 000 jobs in South Africa by 2022 — SAB KickStart, SAB Foundation, SAB Accelerator and SAB Thrive.

SAB’s agriculture programmes also contribute towards the aim to create jobs by growing emerging farmers.     

Related: SAB-Commissioned Research Shows SA Poised To Reap Entrepreneurship Rewards

“From rural entrepreneurs to big business, SAB has laid the foundation to support entrepreneurs and to contribute towards government’s efforts to grow the economy and reduce unemployment in the country,” says Ricardo Tadeu, Zone President, SAB and AB InBev Africa.

“We recognise that one of the major hurdles for SMEs in South Africa is the ability to gain entry into big business and form part of their supply chains. This requires a symbiotic relationship with big business working alongside smaller suppliers.”

SAB Accelerator and SAB Thrive cohesively solve the challenges of creating a healthy pipeline of suppliers that represent the demographics of the country. SAB Accelerator has piloted ten businesses that have created 29 permanent and 79 part-time jobs in a period of just six months, and is currently incubating 24 businesses as part of the official post-pilot intake. SAB Thrive has invested R100 million in seven businesses, which have created 46 new jobs. In addition, the programme has contributed R140 million in new B-BBEE preferential spend.

The SAB Accelerator is an in-house programme dedicated to developing black-owned and black women-owned suppliers. Geared towards fast-tracking participants’ growth, the programme employs ten highly experienced business coaches and ten engineers, offering both tailored business and deep technical coaching to the participants.

It has a three-phased approach consisting of:

  1. Diagnostic: Screening the business’s current situation and systematically identifying gaps and opportunities for growth.
  2. Catalyst: Proposing an intensive three-month coaching intervention addressing key business functional and technical areas of improvement or growth.
  3. Amplify: Providing additional business development to support graduates of the Catalyst Programme.

The SAB Accelerator strongly focuses on enhancing market visibility and access of its participants.

Eligibility criteria:

  • Existing black-owned or black woman-owned suppliers currently servicing SAB’s supply chain at the time of application.
  • Existing black-owned or black women-owned businesses that have potential to join the SAB supply chain based on their product or service.

The SAB Thrive fund is an enterprise and supplier development (E&SD) fund set up to transform the company’s supplier base. The fund was established in partnership with the Awethu Project, a black private equity fund manager and SME investment company. The aim is to invest in and transform SAB suppliers to represent our country’s demographics. SAB Thrive investees benefit from 100% black equity capital and business support.

Related: 6 SAB Entreprenurship Programmes That Provide Business Management And Support

The fund invests growth equity capital into SAB’s existing high-growth black-owned suppliers, furthering their profitable expansion into the SAB supply chain without diluting the black-ownership of these businesses.

Existing white-owned suppliers are provided equity capital to support the enhancement of their black ownership, while facilitating the introduction of black entrepreneurs to their business. The intention is to apprentice the individual to take over the business in the near future.

Eligibility criteria:

  • Black-owned suppliers in the SAB supply chain that want to grow their business through access to black-owned growth equity capital.
  • Existing white-owned suppliers in the SAB supply chain that want to transform their B-BBEE ownership.

Continue Reading

Company Posts

Alternative Finance – Filling The Gap

Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding.

Spartan

Published

on

By

spartan-alternative-finance

Vital stats

Alternative Finance is finance beyond the traditional – it is defined by the financiers’ area of specialisation – by what they specialise in, whom they serve, and how they provide their funding. It does not replace traditional finance but rather functions as a complementary and additional form of funding.

Alternative financers are specialists – they focus on a particular need and on a specific audience. As a result their ‘how’ is customised to deal with their chosen target market and for this targets unique needs. This applies to the funder’s processes and to their level of flexibility around things such as collateral. An example of this is that a SME may have an existing R1 million overdraft (their traditional finance) secured by R 1.5 million collateral but suddenly they need R5 million for some kind of contract or bridging finance – they need it fast and don’t have that extent of collateral.

The traditional funder cannot provide what they need, their process is too long and their flexibility is too low. An alternative financier providing bridging finance and specialising in SMEs is ideally positioned to fill this gap.

Related: 5 Key Questions To Answer For Raising Funding

One of the most significant differences between a traditional funder and an alternative financier is in their process. In the case of the alternative financier, they have often chosen to deal exclusively with a particular customer base, for example SMEs. As a result, this funder has both an affinity and contextually relevant empathy in working with SMEs.

Not only do they speak the same language the funder also has an appreciation for the time and material constraints of the SME and has developed their processes to cater to this market. This applies most notably to the turnaround time of the funding need and to the assessment aspect – where flexibility around things such as collateral is vital in making the finance happen for the SME.

A traditional funder is unable to meet the deadline of a bridging finance need, submitted on an urgent basis, where the finance is needed as soon as 2-3 days from time of application. A specialised or alternative funder is able to do exactly this. A traditional funder is also unable to find creative methods in solving the SMEs lack of high-value collateral in applying for finance.

This SME has generally already used their high-value collateral for traditional credit facilities but now needs funding for growth or resolution of a temporary cash flow challenge. An alternative financier is able to look at such an application in a different way, and has most likely already established alternative ways to make this happen for the SME.

Continue Reading

How to Guides

6 Money Management Tips For First-Time Entrepreneurs

That R25 coffee every morning isn’t taking you to the next level any faster than brewing a pot at the office.

Published

on

money-management

How many times have you been told that saving money is a good thing? Financial specialists recommend that you save a bit of money every month, but that’s easier said than done. After all, it’s not uncommon for people to live paycheck to pay cheque.

However, if you want to start a company, you’ll need to break away from this cycle and start budgeting and saving. At times, this will be a trying task, but it must be done if you want to invest in your future as an entrepreneur.

If you want to start managing your money more effectively and set yourself up to become an entrepreneur, follow the six tips below. With these techniques in your arsenal, you’ll start so see immediate changes, and you’ll set good behaviours in motion that’ll serve you throughout your career as an entrepreneur.

1. Prioritise organisation

When you are organised, you can track every facet of your finances. Record all of your financial information in one place so you can refer to it and keep track of your progress.

When you chronicle all of your financial information, you may want to try and organise it by category. For example, when you are recording your current costs, you can categorise them as “urgent” and “future.”

Not only will this system help you stay on top of your personal finances, but it’ll prepare you for entrepreneurial success because it’s a directly transferable skill.

Related: Smart Money For Small Businesses

2. Check your credit

According to a recent MoneyTips survey, nearly 30 percent of people don’t know their credit score. If you are among this group, it’s time to request a free credit report. Once you know your number, assuming money’s tight, feel free to use a few do-it-yourself credit repair techniques to quickly improve your score.

Understanding your credit score and improving it to the best of your ability is paramount when it comes to money management. A little-known fact among aspiring entrepreneurs is that the funding a new business receives is often dependent on the founder’s credit score.

3. Save where you can

People often cringe when they think about cutting back. Fortunately, there are several painless ways to save. Look at your daily habits and see if you have any spending trends. For example, if you spend $5 every day on lattes, you might consider cutting back and only having the expensive latte every other day. Slowly, you’ll get used to this new habit, and your bank account will reap the rewards.

Related: Time Is Money: Tips To Help You Use Yours Well

4. Search for additional information

The Penny Hoarder

Have you heard of The Penny Hoarder or Dough Roller? These are just two personal finance blogs that can help you better manage your money, but there’s a whole lot more out there.

Subscribe to websites and follow podcasts that offer advice on money management. Also, keep your eyes peeled for informative outlets that speak directly about entrepreneurial finances and follow them, too.

5. Set long- and short-term goals

Have you ever noticed that people want to reach their goals in as little time as possible? If you pick up almost any given health magazine, it’ll claim that it can help you achieve extreme results in little to no time.

Unfortunately, crash diets are often ineffective, and “get rich quick” money management techniques often lack substance.

It’s hard to accept that your goals will take time to accomplish, which is why you create short- and long-term goals. In either case, aim to make goals that are specific, measurable, attainable, relevant and time-based. Ideally, accomplishing your short-term goals will give you the positive feedback that you need to continue striving for your long-term goals.

Related: If You’re Trying To Raise Money, Doing Any Of These 9 Things May Scare Off Investors

6. Find a mentor

If you manage your personal finances and entrepreneurial finances, one thing is certain – at times, it will feel like you can’t keep up with everything. Financial planning can be difficult, and it’s not uncommon for it to feel overwhelming.

As an individual, you can seek out mentors that can help you with personal finances. As an entrepreneur, you can continue to work with these people or seek out more established financial consultants that provide you with guidance you need to run your business.

Managing your finances is a trying and rewarding experience. It will feel messy at times, but the more you practice, the more you’ll improve your personal finances and set yourself up for entrepreneurial money management success.

This article was originally posted here on Entrepreneur.com.

Continue Reading

Trending

FREE E-BOOK: How to Build an Entrepreneurial Mindset

Sign up now for Entrepreneur's Daily Newsletters to Download​​