small business funding


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Every small business finds itself looking for small business funding at one point or another. Finding the funding or money to expand your established small business can be a tricky, time-consuming process – and you still may not find or secure the small business funding you need.


Here are ten things you need to know about South African small business funding that will prevent your funding search from turning into a wild goose chase.

The main sources of small business funding are banks & lending institutions.

The most popular source of small business funding is the small business operators own pockets, but traditional sources such as banks and credit unions are next. That makes your own bank a good place to start your search for small business funding, especially as you banking history is localised.


That doesn't mean, however, that getting small business loans in South Africa is easy. Traditional small business loan suppliers (such as banks) are becoming ever more conservative in their evaluations of prospective small business loan customers. As always, new small business ventures are having the hardest time finding the business start up funding they need.


To counteract this trend, you need to spend some time putting together an attractive small business funding proposal. Learn more about how to meet a lender's expectations and increase your chances of securing the small business financing you need by purchasing books on writing business plans and collecting material from the financial institution on their assessment criteria for granting small business loans.

You have to have a solid written plan for your small business.

There is no way around this and no shortcuts; anyone who might seriously consider giving you small business funding will want to see one. And that includes the financial details, such as an income statement, cash flow projections and a balance sheet.


Fortunately, there is more help for putting together a small business plan than ever before. Local Economic Development Centres and/or Community Futures Development Corporations,  and other government–supported organisations offer local assistance ranging from research help through business plan courses. Some people find business plan software useful in the initial small business structuring phase.

Small business rule #1 – Reciprocity:  There has to be something in it for your lender.

And your small business plan or pitch has to reflect this. If you're trying to get a small business loan, the 'what's in it for them' is obvious - a percentage rate of return. But some potential investors might actually want to stick their fingers in your pie, demanding an ownership percentage or at least a say in how your small business is run.


When you're putting your small business funding proposal together, know what type of lender you're trying to entice and tailor your small business plan accordingly to meet that lender's needs and answer all his or her questions.

Small business rule #2 – Be ready to contribute financially.

Assets help, especially assets that lenders will see as collateral. But making your own financial contribution of some sort may be necessary to secure the small business funding you're trying to get. Many government sponsored small business loans and grants demand an applicant contribution, often of a set percentage of the small business funding sought.


As a small business owner, your most difficult task is finding the money to operate your business. Taking the necessary steps to prepare for a small business loan can minimise the difficulty. Learn what you need to know to clinch the loan deal for your small business.


Banks and other lending institutions cite risk factors as their main reason for turning down small business loan requests from startup small business ventures. Yet, you can still get a loan for your small business by proper preparation.


Avoid the common error of thinking you can start with grants from the government and community agencies. It is even more unlikely than getting the money from your own savings, family, friends, or a bank.


The main requirements of attaining a small business loan are your personal credit history, business plan, experience, education, and feasibility of the small business you are starting or expanding.


The most important task to obtain a small business loan is preparing a business plan. The business plan needs to show the lender that providing you with a small business loan is a low-risk proposition. Your business plan must answer the questions a lending institution would ask.


These questions usually are:

How much money do you need for your small business?

If you are starting a small business, this should be included at least in the start-up capital estimate. Accuracy is important, so request enough money to invest wisely. A contingency plan for unexpected surprises can cost you. Your small business survives on cash flow.


What are you going to do with the money for your small business?

You will have to provide, in detail, the designated use of every Rand requested. A small business loan is often needed for: operations (new employees, marketing, etc.), assets (equipment, real estate, etc.), or to pay off small business operating costs and debts.

When will you repay the small business loan?

Explain in detail how this small business loan will serve as a stepping-stone for your business. You will need to convince the lender (with your financial statements and cash flow projections) that you are able to repay the loan through the expected long-term profitability of your business.


What will you do if you don't get the loan for your small business?

Let lenders know that rejection will not discourage you from starting or growing your small business. You want to portray a confident and determined personality and you will try lender after lender until you receive the money you need to get your small business moving.

As a small business owner, you will need a certain degree of fortitude. Be confident and proud of your small business venture. Let lenders know you are in control and know what's best for you and your small business. Understand that lending institutions need to make loans. But if you don't get one, don't get discouraged. Ask the lender why you didn't get the small business loan. Learn from the answer, move on, and try other lenders.

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