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5 Small Business Loan Ideas

So you want to start your own business but need a small business loan. Where do you look? Who can help?

Entrepreneur

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If you’re not in the position to self-fund your small business, here’s what you need to know about where to look and who you can approach for getting that much-needed small business loan.

1. Small business loans from government

The South African government is acutely aware that small businesses are integral to developing the economy and creating employment. As such, there are a number of initiatives for getting funding from the government. Whether you’re youth, women, previously disadvantaged, or involved in BEE, there’s government funding for you. Here’s a list of some:

The Small Enterprise Development Agency (SEDA)

SEDA has branches in each district municipality around the country.

It provides information, support and referrals for a range of activities such as tender applications, import and export training, trade information, business assessment, support and mentoring, technical support, market access and business linkages.

You can get more information from their site .

The Co-operatives Incentive Scheme (CIS)

CIS provides successful applicants with cash grants to allow their co-operatives to build quality services and suppliers to improve and grow their business.

Related: Attention Black Entrepreneurs: Start-Up Funding From Government Grants & Funds

Cash grants are typically awarded to black-owned companies, initiatives helping overcome unemployment and poverty, and are registered co-operatives. More information is available at here.

2. Small business loans from banks

bank-account-bank-loan

Several of South Africa’s national banks are involved in encouraging and supporting entrepreneurial activity.

They’re able to provide initial start-up capital, working capital, short-, mid- and long-term lending, as well as business support.

Like government funding though, banks have conditions that need to be met before lending occurs in order to lessen their risk in financing your business.

  • Start by ensuring your house is in order. Make sure you have comprehensive records and documentation that shows your business has been profitable for a period of time, that your credit record is clean, and that you have collateral to borrow against.
  • Make sure you have a sound business plan that you have written and understand, complete with financial records and projections to discuss with the bank.
  • Have your financial statements ready, be able to detail how much money is needed and for what purpose, and foster a good track record with your bank before asking for a loan. If you’re in a good position to get a loan, shop around to see which bank can offer you the best loan terms.

Related: How To Find Funding in South Africa

3. Small business loans from family and friends

You may be in the position to ask family and friends for a loan, but be aware that while this may offer the most favourable loan terms and interest etc., it can come at a cost and can even seriously damage your relationships. Here’s what to pay attention to:

  • Family and friends are more likely to invest in you because they love you, not because they have faith in your business idea.
  • Loans create personal and emotional issues. If you borrow from a relative and aren’t able to repay it, it can cause feelings of guilt, embarrassment and resentment.
  • Be clear on giving versus loaning. While a friend or family member may say they’re “giving” you the money, they rarely mean it in the legal sense of a “gift”. Make sure you and the lender are absolutely clear on the terms and conditions of the loan to avoid future conflict over misunderstandings.
  • Debt can be better than equity. If you borrow money and pay back the loan with interest, it can be a better move than offering equity in the business in exchange for a loan – with debt, you’re still in control of the business.
  • Try align your loan payments to cash flow. Consider cash flow obligation rather than fixed repayment schedules. That way, when you can spare the money, you can repay.

Related: 4 Funding Sources

4. Small business loans from investors

business-investors

When looking for funding from investors, consider the kind of investor you want. An angel investor is someone with significant funds to spare that will offer you finance in exchange for a piece of the action.

They typically want equity in the business or a fixed percentage ROI, and want to be involved in the business’s growth – offering mentorship, support and advice with business decisions.

Loans from venture capitalists are quite different to angel investors. This kind of lender is looking for a high growth business typically in the tech industry, and will want to pull out with a handsome ROI after just a few years.

Related: 10 Tips for Finding Seed Funding

Venture capitalists expect to be involved in management decisions, are strict on their terms and conditions, and expect you to adhere to the business plan you presented to them.

5. Small business loans from crowd funding

A new form of lending in the last few years, crowd funding provides businesses with the opportunity to attract funding through attracting a number of micro-lenders to the cause.

Related: Kickstart Your Business Through Crowdfunding

A business will post a profile and business pitch on a crowd-funding platform like Kick-starter.

Business owners are able to negotiate terms and conditions of loans ranging from a percentage of interest, to more creative rewards such as the lender’s name on a menu item.

Funders can also decide how much they’re prepared to invest, be it as little as R100 right up to the full loan requirement. Visit www.kickstarter.com to see how other small businesses are getting funding.


Related: Government Funding and Grants for Small Businesses

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Small Business

Simple Strategies For Financing Your Small Business

Below is some useful information on simple strategies to finance your small business.

Amy Galbraith

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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.

Related: Seed Capital Funding For South African Start-Up Businesses

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.

Related: Government Funding And Grants For Small Businesses

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.

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Small Business

How Small Businesses Can Give Back Without Breaking The Bank

If you are not sure how to start giving back, below are some top tips on how to do just that… without breaking the bank.

Amy Galbraith

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As a small business owner, you might think that charitable giving is impossible on your small budget. But, this is not true. You can donate to a charity or contribute to a fundraiser, even if you have a startup or small business budget. You just have to be creative about it.

In today’s world, more and more consumers care deeply about social causes, which means that you need to seek ways to incorporate giving back into your business strategy. If you are not sure how to start giving back, below are some top tips on how to do just that… without breaking the bank.

Encourage your team to volunteer

You will see many calls from charities, such as MSF, to donate time and resources. One way to give back without breaking the bank is by encouraging your team to volunteer and offering paid time off as an incentive for them to volunteer at a charity.

You can give your employees a specific amount of time each month or quarter for volunteer work, and you will soon notice morale improving. It will also increase your community involvement and visibility in your community. You will have to ask your team which days they would prefer to volunteer, as many people might prefer the weekend over a Monday or other weekday.

Related: The Importance Of Being Organised For Your Start-up

Use your talents

Giving back does not always have to mean making a monetary donation. You can use the talents of the people in your business to give back to clients, or you can offer your services pro bono to charities that could use them.

For example, if you are a marketing agency, you can offer to upgrade a charity’s website or write content for their social media pages. If you are a financial business, offer a free day of accounting services to a charity that desperately needs some bookkeeping help.

Using your talents costs you nothing but can help to make a significant impact on the cause that is closest to your heart.

Set up a collection jar in the office

If you have chosen a charity, such as MSF to donate to, it can be difficult to find the funds in a small business. A simple but effective way to collect some funds is to set up a collection jar in the office for employees to contribute to.

Be sure that your collection jar is placed in a high traffic area of the office, such as in the kitchen or on the way to the coffee machine. You can make it fun by running a competition of who can donate the most and offering a prize, or you could ask those who bring in their own lunches to donate what they would have spent on purchasing a lunch that day. Be sure that your staff never feel forced into giving a large amount of money, but remind them the jar is for a good cause.

Launch a charity drive

If money and time are in short supply in your small business, you can still give back by launching a charity drive. You can collect anything from books and clothes for children, tinned food and bedding for an animal shelter or even tinned goods for a soup kitchen.

Be sure to choose a charity that everyone in your office agrees with supporting, otherwise it will be difficult to encourage everyone to take part. Take it one step further and ask your local community to contribute to your charity drive. Set up a place in your office where people can drop items off and offer them a thank you card or note so that they feel appreciated. Make posts on your social media platforms before, during and after the drive, and ensure that you share photographs of your company donating the goods to your chosen charity.

Related: How Entrepreneurs Can Make Good Decisions Quickly

Use your voice

If you know about a cause, such as the outbreak of Ebola in the DRC in 2017, then as a business you can use your voice to make people aware of it. You can create a social media campaign for a charity or join in their advocacy, lobbying, letter writing, and other efforts.

By adding your voice to theirs, their cause becomes louder and it is likely that more people will be interested in donating to them. For example, you could set up a Facebook page for your local animal shelter and create informative posts about pet health for their followers to share. Or you could post blogs to your company website detailing the needs of a local homeless shelter and how people can help them.

Be creative

You do not have to stick with monetary donations when helping a charity, although these are much appreciated. You can look for creative ways to give back without breaking the bank. As a small business, it is important to build your presence with consumers, and helping a charity is an effective way to do so.

You can encourage your team to volunteer, use your skills to help your chosen cause or you could set up a collection jar in the office. Whatever you choose to do, make sure it is creative and in line with what your employees can achieve.

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Small Business

The Importance Of Training In A Small Business

Having happy and satisfied employees is great for business and will put you two steps ahead of your competition.

Amy Galbraith

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As a small business owner, you might not think that training your staff is as important as it would be in a larger company. This is where you are wrong. A small business is still a business and, in order to be successful, you will need to have staff that understand their roles and their responsibilities completely.

They should also be trained in other aspects that do not relate to their position, such as computer literacy and general administrative duties. Skills development facilitation is an effective way to ensure that your employees perform to their highest levels and feel appreciated and valued in your company.

It can help to address weaknesses

While you are not trying to make your employees feel bad about their performances, training programmes can help them (and yourself as the business owner) to address any weaknesses they might have.

By addressing these weaknesses, you can find ways to improve their skills, such as sending them on computer courses or communication courses. Training your staff also allows everyone to be elevated to the same level of competency, making for a more productive and proficient business. Any employees who feel they have weaknesses will be able to improve their skills and reach the same level as the other employees.

Related: How To Plan Effective On-The-Job Training Programmes That Work

Employee performance will improve

If weaknesses and shortcomings are addressed during skills development facilitation courses, this will obviously help to improve your employees’ overall performance levels. You should be sure to send employees on relevant courses that are targeted to their roles and responsibilities so their departments can improve too.

Your staff might be feeling unmotivated or overwhelmed, and a training programme can help to improve their confidence and performance. Improved employee performance is a huge positive for a small business, as it will mean a faster turn-around time and projects being met on-time and within the client budget. Training your staff in their areas of expertise is a sure-fire way to boost their confidence and performance levels.

It can provide direction

direction

If you have a department that is not operating at its full capacity, then a training programme might be the perfect tool to help this department reach its full potential and find direction. Having direction when working in a small business is vital to any employee, as it helps them to be productive and reach business goals.

You can choose from a range of skills to train your staff in, such as computer skills or office administration skills, targeting a certain department that might help with direction in their work. Skills development facilitation can also help those employees who are not sure of their roles or whose skills are too “general” to fit into one department.

If you only have a few employees, sending them on training courses can help to show them what roles and responsibilities in the company are.

Training provides consistency

Sending your employees on skills programmes will ensure that everyone who works in your business has the same level of experience and expertise. This consistency is particularly important when it comes to policies and procedures, as all employees need to be aware of the expectations and procedures within the company.

Putting all staff members through the same basic training will ensure that everyone has the same exposure to every department, which can help the office run smoothly and improve employee relations. Having consistency in your office means that everyone is operating at the same levels and that your business is able to finish projects at a much quicker rate than before the training. Be sure that you also look into more targeted courses for your different departments.

Related: 5 Tips To Make Managing Employees Less Stressful For Everyone

It gives you an edge on the competition

Human capital and skills can help a small business to get an edge on the competition. This is especially true if your entire workforce has been trained in their fields and has received the same training across the board.

Having an edge on the competition is not only beneficial to you as the business owner, but will help your staff to have a sense of pride in their work and can even help to retain your talented employees. Being able to outdo your competitors relies heavily on the abilities of your employees, which means that you should take your training programmes seriously. If you want to be a success, put the needs of your staff first and see how quickly your business improves.

Happy employees means better business

Sending your employees on training programmes can help immensely with job performance, employee retention, office consistency and addressing any weaknesses there might be. Your employees will feel valued and respected, which, in turn, will improve their loyalty to your company and help with quicker turnaround times.

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