Funding your start-up 2024

Funding your start-upWhen Sello entered the Money Makeover Challenge, he was establishing a start-up business to manufacture eco-friendly straws for restaurants and retailers. He had taken out personal loans to purchase manufacturing equipment to produce the prototype.

Like so many start-up entrepreneurs, Sello faces a catch-22. Absa has a working capital funding option for black-owned small businesses via their Enterprise Development Funding, with no requirement for collateral, but they base their loan on existing contracts, purchase orders or a valid letter of intent from buyers of the product.

The Industrial Development Corporation requires a prototype, letters of intent from prospective clients and a business plan before they will consider funding.

Your start-up idea doesn’t begin with money

While most entrepreneurs start with looking for funding, according to Norman Venketiah, head of small and medium enterprises (SMEs) in KwaZulu-Natal and Mpumalanga, funding is the last piece of the puzzle when it comes to starting a business.

A start-up entrepreneur must first acquire business and financial skills, find a committed buyer or demand for their product, and then apply for funding.

The mistake many business owners make when applying for funding is not having a comprehensive business plan. A business plan is not a wish list of what you hope to achieve. It must have hard figures and facts.

This includes a proper SWOT (strengths, weaknesses, opportunities and threats) analysis, understanding the market and competitors, as well as a thorough financial analysis of the costs, breakeven point and potential profits.

A business plan is important not only to acquire funding, but to inform the entrepreneur whether the business is feasible before they commit funds.

Get your personal finances in order

When it comes to having your own business, knowledge can be more valuable than money.

While a funder will require a business plan, they also look at “backing the jockey”. This means they will take the personal finances of the business owner into account.

If the owner is not managing their own finances appropriately, it does not bode well for the way they will manage the finances of their business.

Over the last five months, Sello, with the support of his Absa financial adviser Philander Tshivhenga, has worked hard on cutting his expenses and reducing his debts.

Watch Maya’s Q&A video with Norman Venketiah about the various options available for small businesses when it comes to funding but also where to get advice and training.

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