Any business would require funding at some stage. There are 7 main sources of funding:
- Self funding
When starting a business, your first investor should be yourself—either with your own cash or with collateral on your assets. This proves to investors and bankers that you have a long-term commitment to your project and that you are ready to take risks
- Bank Loans
Banks will only lend money in your personal capacity and loans to a business will only be granted if you sign surety in your personal capacity. They normally want to see a comprehensive business plan. Keep in mind that Banks are the people who lends you an umbrella when the sun shines and want it back as soon as it starts raining.
Rather have a look at https://www.businesspartners.co.za/en-za/home
- Love money
This is money loaned by a spouse, parents, family or friends. Investors and bankers consider this as “patient capital”, which is money that will be repaid later as your business profits increase.
When borrowing love money, you should be aware that:
- Family and friends rarely have much capital
- They may want to have equity in your business
- A business relationship with family or friends should never be taken lightly
- Angel Investor
Angels are generally wealthy individuals or retired company executives who invest directly in small firms owned by others. They are often leaders in their own field who not only contribute their experience and network of contacts but also their technical and/or management knowledge. Angels tend to finance the early stages of the business with investments in the order of R25 000 to R100 000.
In exchange for risking their money, they reserve the right to supervise the company’s management practices. In concrete terms, this often involves a seat on the board of directors and an assurance of transparency.
Angels tend to keep a low profile. To meet them, you have to contact specialized associations or search websites on angels
- Venture Capitalists
The first thing to keep in mind is that venture capital is not necessarily for all entrepreneurs. Right from the start, you should be aware that venture capitalists are looking for technology-driven businesses and companies with high-growth potential in sectors such as information technology, communications and biotechnology.
Venture capitalists take an equity position in the company to help it carry out a promising but higher risk project. This involves giving up some ownership or equity in your business to an external party. Venture capitalists also expect a healthy return on their investment, often generated when the business starts selling shares to the public. Be sure to look for investors who bring relevant experience and knowledge to your business.
- Business Incubators
Business incubators (or “accelerators”) generally focus on the high-tech sector by providing support for new businesses in various stages of development. However, there are also local economic development incubators, which are focused on areas such as job creation, revitalization and hosting and sharing services.
Commonly, incubators will invite future businesses and other fledgling companies to share their premises, as well as their administrative, logistical and technical resources. For example, an incubator might share the use of its laboratories so that a new business can develop and test its products more cheaply before beginning production.
Generally, the incubation phase can last up to two years. Once the product is ready, the business usually leaves the incubator’s premises to enter its industrial production phase and is on its own.
Businesses that receive this kind of support often operate within state-of-the-art sectors such as biotechnology, information technology, state-of-the-art sectors such as biotechnology, information technology, multimedia, or industrial technology.
- Department of Trade and Industry
The DTI provides a few support programmes for businesses but the main emphasis is on community development.
Have a look at https://www.thedti.gov.za/financial_assistance/financial_incentives.jsp?subthemeid=8