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I can’t find funding for my business. What other options do I have?

Some advice as to what you can do when your funding application are not successful.




Funding Basics

What is capital?

Capital is a measure of the accumulated financial strength of an individual or firm to start or buy a business. If you look at most start-ups, very few get start up funding from commercial banks. Many are launched with small amounts of money – Dell Computers started in 1988 with less than $1 000 in the bank. T

he founder of Dell Computers, Michael Del, used “bootstrapping” to get his start up going. He asked his grandparents for a loan and then dropped out of university at the age of 19 to run PC’s Limited, which later became the famous Dell Computer Corporation, then ultimately Dell.

There are two stages of finance for start-up businesses

Stage 1: Start-up Capital
Stage 2: Expansion Capital

Stage 1

Find Money from your own resources, family or friends. Most entrepreneurs face the same problem – finding start-up capital. Banks won’t lend money to a start-up unless the start-up has collateral or has been in operation for a reasonable amount of time. No lender will even consider a loan without a decent business plan.

Bootstrapping is your best chance

Start-ups that “bootstrap” arrange finance they need through small loans from friends and family, take a partner or seek an angel investor to provide start-up capital. Start-ups have to be innovative and can:

  • Apply for a micro loan
  • Use savings to fund your business
  • Keep your day job. You might be able to start your business by working on it during weekends and evenings
  • Try shifting from full-time to part-time work when you start your business
  • Ask your family for help so you don’t have to go to outside investors
  • Approach an angel network

If you are looking for outside investors ask yourself these questions

  • How much is your start-up worth?
  • How much capital do you really need?
  • How much equity are you prepared to give up?

Social networks

South African entrepreneurs are flocking to social networks such as Facebook and Linkedin as a new way to find the money or partner needed for starting or growing their businesses. Following the recent economic slow down banks have tightened lending policies. This has pushed entrepreneurs to find alternative sources of financing and support.

Stage 2

Becoming Investment Ready

Your business plan markets your business to potential investors. It must be detailed, and you must take time and effort to complete it thoroughly. The plan needs to be an up-to-date, concise, and comprehensive outline of what you intend doing. Remember, a business plan is a living document.

Where to present the proven business concept

When you reach stage two, you will have proven your business concept. This is the stage where you may require additional funding to expand the business. There are different avenues that you can investigate. Banks, private lenders and angel investors are well worth approaching.

Commercial debt funding

Commercial debt funding is only possible once a business has moved out of the high-risk phase and has developed a sustainable and predictable cash flow. Before this point, commercial bank debt funding for a start-up, or early stage business, is probably irresponsible, as you do not have a record of accomplishment of any kind.

Traditional investors

You can approach traditional investors such as commercial banks, the Department of Trade and Industry (Dti) or private funders such as Business Partners. Most lenders require that the borrower have at least 10 % if not more, of their own contribution, before they will lend you any money, as they are not prepared to take all the risk.

Cash flow

Once the business is established and it is generating cash from sales, you would be in a better position to find the 10% contribution that is required to loan money. You can also negotiate longer payment terms with creditors and build a debtors’ book that can be used as security for a loan.

Bootstrapping explained

Bootstrapping is the act of starting a company with personal finances or small loans from friends and family rather than through traditional means such as a bank or business loan. Starting a business with very little money and even less credit can be difficult but it has its advantages:

  • It allows you to retain all or almost all of the equity so you would have total control over the business
  • You are not in debt

 There are various ways in which start-ups can raise money through bootstrapping

  • Use your personal credit card to raise the money to start your business.
  • Take out a second bond on your house
  • Use your savings to fund your business.
  • Keep your day job. You might be able to start your business by working on it during weekends and evenings.
  • Work part-time. Try shifting from full-time to part-time work when you start your business
  • Ask your family for help so you don’t have to go to outside investors.
  • Apply for a grant so you will have the funds to back up your business. Some organisations and governments offer grants to entrepreneurs. You can invest grant money into your company for start-up funding.

Other ways to get a new business financed

Keep working

If you have a full-time job, keep working at it until you have built up a big enough customer bases to go on your own. Then you can branch out and start developing other areas such as software development.

Find a partner

Finding a partner who has skills that can compliment your business is another route worth thinking about. If you can find a partner who is experienced in sales and marketing, the partner would bring in enough business to sustain both of you and help grow the business to a new level.


Through business networking online you can look for business partners and join like-minded communities to find good corporate links. When you look for a free business-networking website, make sure the one you select is relevant to your business. Look for one with interesting site content, useful tools and a good-sized community.

Joint venture

Consider approaching an existing business that may benefit from the services your company offers and you could form a partnership with them. A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal.

Limited Co-operation with another business

One option is to agree to co-operate with another business in a limited and specific way. For example, a small business with an exciting new product might want to sell it through a larger company’s distribution network. The two partners could agree a contract setting out the terms and conditions of how this would work. It’s worth taking legal advice to help identify your best options and to ensure that you are not being mislead in anyway.

Bid for work

There are excellent internet sites where you can bid for work. Join and create your own profile where you can bid for work. Elance delivers an immediate, cost-effective and flexible way to find, hire, manage and pay independent professionals and contractors online.


Other options include research grants and funding that is offered by Government and through the private sector. Contact your local Chambers of Commerce who will be able to provide more information with regard to programmes being offered by big businesses and contacts in terms of finding grants.

Think outside the box

There are many options out there. You can earn money by organising events that range from birthdays, weddings, 21st celebrations to company Christmas parties. Another good business idea is the childcare business, dog walking service, or taking something you are passionate about and turning it into a moneymaking opportunity.

You can’t start a business until you have a Business Plan

Once you have settled on an idea, you must prepare a business plan. A business plan is the road-map, so to speak, of your business. It is a living document that changes as the business develops. With out one, you cannot apply for funding or seek partners, as you have to be able to show on paper what your business will entail and how you intend to run it.

More info on starting a business

For more information on how to start a business, read Entrepreneur’s guide: 21 Steps to Start-up.

Entrepreneur Magazine is South Africa's top read business publication with the highest readership per month according to AMPS. The title has won seven major publishing excellence awards since it's launch in 2006. Entrepreneur Magazine is the "how-to" handbook for growing companies. Find us on Google+ here.

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Company Posts

Why Spartan Is Focusing On SME Funding And How They Can Support Your Business

Spartan doesn’t just fund entrepreneurial businesses, it is an entrepreneurial business. Kumaran Padayachee, CEO, Spartan reveals this is why his team understands SME financing needs and the unique challenges founder-led businesses face.

Spartan SME Finance




Historically speaking, entrepreneurs don’t typically have the quantity and quality of collateral needed to secure debt finance. It was this realisation that led Spartan to develop and deliver a solution that would help SMEs to grow their businesses, even though they didn’t always meet the criteria of more traditional lending institutions.

“We understand that many business owners don’t want to go the equity funding route, selling shares in their businesses in exchange for funding. Without the collateral needed to secure debt funding however, this is often the only route available to them,” says Spartan CEO, Kumaran Padayachee.

“We decided to approach things from a different angle. To service this sector, you need to be flexible. The same rules don’t apply as they do for corporates. To achieve this, we’ve assembled a team that really understands SMEs, their inner workings, the finance they need and the terms that will give them the best ROI for the funding they receive — after all, the point of funding is to help your business grow, so ultimately that’s what it needs to achieve.”

Spartan’s offers financing


At its core, Spartan finances small businesses (fast-growing companies with R5 million to R10 million annual turnovers) and medium businesses (R10 million to hundreds of million in annual turnover).

Spartan finances specialised asset finance (tech, software, plant and machinery, office fit out and furniture); working capital finance (bridging finance, medium term loans); and growth finance (expansion, BEE deals, acquisitions).

Working capital in particular is a big portion of what Spartan assists its clients in. “This is project and growth-related finance, and many of the enquiries are for working capital, for which there is a huge need in the SME landscape.”

Related: Financing That Backs Entrepreneurs

What finance suits your business?

As a debt funder, Spartan’s team carefully evaluates what the finance will be used for, and if the return is greater than the repayments — in other words, does finance make financial sense for the business?

“There are numerous ways that finance can be applied incorrectly by SMEs,” says Kumaran. “One of the first flags we look for is debtors age. If the industry norm is payment in 30 days, but a business is typically paid by its clients in 60 or 120 days, then we know there is something wrong with their internal processes.

Either the company is too shy to be assertive with clients, or it lacks the capacity or capability to invoice clients and collect cash. Either way, the result is a shortage of cash. Business owners in this situation apply for cash in order to be able to pay the bills, when they should be reviewing their business, pulling one or two levers, and improving their cash flows.”

Growing your business with alternative funding methods

On the other hand, there are many situations where working capital and bridging finance can help a business to grow beyond its own, organic abilities.

“A customer project or contract that requires a new product line or opening a new branch are both positive, expansionary situations. The problem is that there’s a lead time gap. You need to start the project, spend cash to hire people or purchase equipment, build internal capacity, deliver on the project and then the customer only pays you. Working capital and bridging finance allow the entrepreneur to do just that, and the company grows as a result.”

Bridging finance in particular is high risk and requires a large amount of flexibility, which is why more traditional funding institutions shy away from it. Spartan on the other hand offers revolving bridging loans to customers the team has worked with. “We understand this space, and our aim is to support the entrepreneurs within it,” Kumaran concludes.

Related: Alternative Finance – Filling The Gap

Alternative finance solutions

Spartan is an Alternative Finance company  that specialises in financing Small and Mid-sized businesses by providing: Growth Finance (structured finance for expansion); Specialised Asset Finance (equipment/machinery/technology/software/office fit-outs/energy/etc.) and Working Capital Finance (bridging finance & medium term loans).

Bridging Finance

Bridging Finance is available for one to three month terms and is ideal for contract or project-based businesses. It is a solution that assists businesses with solving cash flow issues due to growth-related challenges in their business and is either for a once-off need or for revolving business use.

Spartan is an Authorised Financial Services Provider 47631 and Registered Credit Provider NCRCP8669. e finance solutions.

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What do I need to do in order to get a successful crowd funding campaign?

Advice on getting the gold you need for your crowd funding campaign.

Ambassador Tal Edgars



I recently read through crowd funding and though this might be of benefit to me. What do I need to do in order to get a successful crowd funding campaign?

70 percent of most crowd funding campaigns never reach their funding laid out plan. If you only reach a portion of your desired pledge amount all donated funds are then returned to investors once your campaign date is up. Do your homework and make your campaign count.

To get the best out of your campaign, I would strongly advise you do the following:

  1. Lay out your plan way in advance
  2. Keep a proper and well-articulated business plan
  3. Create a compelling story.
  4. Use the social media and start a social media campaign
  5. Frequently promote your fundraiser, connect and interact
  6. Dish out rewards and incentives
  7. To go viral, go for educative, informative and entertaining videos
  8. Be more than unique and creative as more exposure will translate to more potential pledges
  9. Choose the right crowd funding site for you.
  10. Know and understand your end target audience



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Where can I turn when banks are not helping?

Getting bank finance for my restaurant is almost impossible.

David Lewis



Getting bank finance for my restaurant is almost impossible.  How else can I access the funding that I need?

Most small businesses will experience a cash flow challenge at some point during the next 12 months and raising capital from traditional banks is becoming a real challenge. Conservative lending policies and onerous application processes mean that finance applications can take up to twelve weeks or longer.

Banks require significant securities, which many business owners are unable to meet. In short, banks are making it very tough for small businesses.

The business cash advance

For businesses that accept credit or debit cards as a form of payment for their goods and services (termed merchants), the business cash advance is now available as alternative source of funding.

In simple terms, a business cash advance offers the merchant an upfront advance to buy a discounted amount of future business turnover.  For example, you may be advanced R80,000 for R100,000 of future turnover, so the fees can be easily calculated as R20,000.

The payback is an agreed percentage of your turnover, paid daily until the full amount is paid across.  Payback increases and drops with your business turnover and the smaller daily payments are often easier than monthly fixed instalments.

Quicker turn-around and more accessible

Comparing it to a bank loan, the business cash advance is more accessible, operates over a shorter term and requires no personal security.  It is also much faster, typically available within two weeks.

The advance amount is based on historical credit and debit card sales and pay overs are daily.   The costs are fully transparent and there are no penalties for late payments or extended payback.    However, accessibility, flexibility and convenience come at higher cost than traditional bank lending products.

As with any financial product, it is important that the benefits gained from using the money are more than the costs, so it is important to have a good purpose for the funding and carefully consider the available options.

Over the last three years, the business cash advance has becoming more main-stream and this funding is used by business with a relatively high card turnover, such as restaurants, retailers, beauty salons, supermarkets, convenience stores etc.

What to use the advance for

The advance is typically used for a business opportunity, such as expansion, new stock, new equipment, marketing etc.  Alternatively, it also offers through a difficult trading period or to cover an unexpected expense such as equipment failure when the money is needed quickly.

Small businesses are a vital part of the South African economy, contributing over 65% of South Africa’s employment and over 50% of GDP – accessing funding is imperative for these businesses to survive and grow.

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