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Funding frustration

Nov 29 2012 07:54

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A Fin24 user laments the difficulty of finding capital to fund his business. He writes:

Accessing enough working capital from my bank has proven difficult.

I've been financing my business with my pension money. Now my pension money is finished.

I have equity of R1m in my house. This hasn't yet convinced my bank to increase working capital currently sitting at R35 000.

Our experts answer:

Tienie le Roux of Business Consult and independent business consultant Anton Ressel agree that accessing working or other capital for entrepreneurs is extremely difficult.

Many mainstream financial institutions are loathe to fund working capital, especially for an extended period of time, said Ressel.

Adds Le Roux: "Neither the banks nor the government agencies are helpful.

"Established businesses may have an easier time to get loan capital but young businesses do battle to convince lenders. Banks are even more so.

"Banks and other lenders look at a few things before they would lend capital to a business.

"The two most important things are security (it seems that you may have that), but the other aspect is the payback ability of the business.

"To convince a bank you will need a comprehensive business plan, with pro forma balance sheets and income statements for at least three years into the future, as well as a cash flow analysis for the same period.

"Many young businesses may have cash flow problems in the beginning, as profitability is under pressure and sales are lagging.

"The investment in stock and the financing of debtors also take its toll.

"The best advice is to prepare the business plan and live it even if you do not get the capital from the bank. The discipline and dedication that you will bring into your business will be a great help for you in the future. I wish you all the best with your business!"

Ressel suggests the Fin24 user contact SEFA and find out whether he qualiies for any of their finance schemes.

*Share your experience of setting up your own business, or simply ask a question. Our business panel can put you on the right path.


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