Small business funding

The difficulty in obtaining funding is a longstanding and often lamented problem experienced by SME’s.

WHILE THE LACK of funding continues to be a major concern for aspiring entrepre-neurs and business owners, Minister Patel of the Economic Development Ministry recently announced a R1-billion funding initiative. Aimed at funding/promoting small business development, this initiative will be adminis-trated through the Industrial Development Corporation (IDC).

As the manager of a funding platform, I often encounter what amounts to gross ignorance of ‘the rules of the game’. Applicants appear to be labouring under the misconception that once their application has been submitted, their role as applicant has been satisfied and that they can now sit back and wait for the funder to fulfil their part of the bargain, which is to distribute the funds.

While living in debt is not to be encouraged, for an entrepreneur starting out with few resources, borrowing is a necessary evil. Applicants indulge in excessive borrowing as they seem-ingly forget that borrowing money is not like winning the lotto — loan funds have to be repaid.

• KEEP COSTS DOWN. Spend sparingly in order to keep your borrowings and therefore your repayment obligations to a minimum. This might mean limiting yourself to working in what amounts to a shoebox while you dream of having a spacious and luxurious office. Always shop around for the best deal and do not be afraid to negotiate or ask for a discount.
• KEEP IT SIMPLE. Living by the simple-stupid motto will help safeguard you against costly ‘school fees’ as you learn the rules and get to know the playing field. By being straight-forward in your communications, from the language used in your business plan to your company organogram, you will avoid potentially costly miscommunications.
• YOUR BUDGET MUST REFLECT THE REALITY. As far as possible, a budget must reflect the true situation and circumstance. A budget should demonstrate that the funding received will be well spent and by this we mean smart, not cheap. In my experience a few well-aimed phone calls can cut thousands of rands off a proposed budget.
• CREATE A RELATIONSHIP. The power of influence is your trump card. Applying for funding is a process that can take months and because receiving the funding
  is only the start of what could be a lengthy journey until the loan is repaid, we recommend building a relationship with your financier. Make your contact person a friend; establish common ground for a sustainable relationship.
• SHARPEN YOUR AXE. Work smarter and push harder. Work whilst others are resting, playing or sleeping and refuse to accept no! Funders will make numerous demands for documentation, quotations and other supporting documents — be prepared.