If you have grown your business yourself, using your savings or perhaps by taking money out of your bond, then you know all about bootstrap funding.

However, you may also find that your business has reached a point beyond which you can no longer self-fund it. 

This point in the life of a small business can be a stumbling block, as accessing small business funding in South Africa can be a challenge. The prospect of jumping through hoops deters many business owners, but this needn’t be the case.

In fact, there are a number of options available to existing businesses – although it should be noted that finding funding for small businesses in SA requires a degree of preparation. With the country in a technical recession as of late 2018, lenders are likely to insist on more evidence of a borrower’s ability to repay any funds that they advance.

So what means of small business funding in South Africa are available, and how can you position your business to take advantage of them?

While growth and chasing sales may seem the most important tasks facing small business owners, it’s also vital that you ensure that both your own and your business’ credit ratings are in good order – evidence of missed payments or defaulting or loans could well prove fatal to any attempt to borrow.

Keeping your business and personal finances entirely separate is critical – and can also have positive legal and taxation benefits.

Self-funding allows you to maintain complete control over your business, but it could also limit your capacity for growth. After all, you don’t want to take on significant personal debt to support your business.

Angel investors are one option when it comes to small business funding in South Africa. An angel investor is a wealthy individual (or group of people) with the money to invest in companies that they believe could be profitable. Typically, they are successful business people themselves, which means that they can also mentor entrepreneurs.

Some angel investors adopt a “hands-off” approach, while others prefer to be more involved. Either way, their investment will entitle them to either an equity stake in your business, or interest on the loan.

It’s vital to have a written agreement in place governing all these variables. If not, an angel investor may suddenly withdraw their support (for example, in the event of a dispute), leaving the business vulnerable to failure.

Bank funding offers the advantage of being backed by a major financial institution, but banks have become increasingly risk-averse, and meeting the requirements for accessing bank loans (whether overdrafts or advances) is becoming increasingly onerous, in terms of providing financial records, projections and business plans.

National government currently runs a number of schemes that offer small business funding in South Africa – providing that your business qualifies. Terms are generally more lenient than with commercial lending, but given the government’s mandate to economically empower certain sections of society, you may be disqualified automatically.

A contemporary version of angel investment is crowdfunding, which typically works via online platforms and enables businesses to raise funds from multiple individuals in return for equity or discounted products or services once the business is operational. Crowdfunding is more applicable to start-ups than established businesses.

Existing businesses with proven turnover and financial records also have the option of applying for alternative business funding. This offers a degree of flexibility than bank finance cannot, while enabling you to retain control of your business. Unlike with angel investment, you will not be giving up any equity, or putting your business assets at risk.

EBC offers an innovative answer to the need for small business funding in South Africa. We provide flexible yet responsible working capital by buying a stake in the future turnover of your business. Our pay-as-you-trade model has been specifically designed for businesses that have regular transactions (credit card payments or EFTPOS) and that meet our minimum monthly turnover and trading history requirements.

If you want to grow your business without becoming tied up in red tape, beholden to angel investors, or giving up any control, then alternative business funding from EBC could be the answer you’re looking for.

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