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Where to for expansion funding?

Aug 03 2014 17:45

Fast food business owner Zakhele who started out three years ago, is now looking to expand. Seeking advice, he writes:

"I started a fast food business on July 20 2011. I currently employ 4 people. I have just bought a new business place - a very busy location - and am looking to expand. I need financing to start the business as soon as possible so I can generate more revenue.

"My problem is that because the business started with not sufficient operation capital I am unable to bank and have proper financial records. Who can I talk to assist me with financing to expand my business."

Christo Botes, Executive Director Business Partners, responds:

Dear Mr Zakhele,

You are not the only person having to deal with these issues in raising finance to start-up a new business or expanding an existing one.

If you are not banking all your income into and paying your expenses from a formal business bank account you are running an informal business. 

Your business is hence also not formally registered with the regulatory/statutory authorities such as the South African Revenue Service (for VAT, income tax and PAYE purposes), Department of Labour for workmen's compensation and the local authority for a business license purposes. In their and the bank's eyes you have no track record and most banks would ask you to formalise your businesses and become a good law abiding corporate citizen.

You cannot correct the past, but you can change the way you approach the next phase in your growth as an entrepreneur and business owner. 

The long term benefits of running a formal business are multiple and maybe that should be your starting point before you expand. The financiers would be more positive in considering your expansion plans if you have a proper foundation from which you want to build and grow your business. 

I advise that you use the Small Enterprise Development Agency (Seda), an agency of the Department of Trade and Industry, to direct you in formalising your business. They have offices in each province and/or have provincial structures that render the same service in the province.

Another good resource is the SME Toolkit website.

All the best!

- Fin24

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