Tag Archives: finance

Financing your startup like a pro

 

Anyone who has ever ventured into the world of startups knows that financing can be one of the biggest hurdles. Whether your plan is to bootstrap, finance yourself or take out a loan, it’s certain that you will risk major money problems if the business does not perform as expected.

 

It’s expected that all business ventures will carry some risk. But there are many ways to mitigate this risk by limiting taking on massive debt. It’s important that you carry out extensive market research, for example, to ensure you identify possible setbacks. It’s also possible to limit your expenses in the early years by renting equipment rather than buying until your business is stable. And this is when you can apply for plant and machinery finance. At some point, whether it’s sooner or later, you will have to go out on a limb.

 

Where to begin

 

At the beginning stages of launching your startup, it’s important that you have a clear-cut business plan. This should provide you with all of the insight you need to estimate how much capital you’ll need. It might be better to overestimate how much you’ll need. This’ll allow you to have enough cash on hand to cover all unexpected expenses and maintain a positive cash flow. This is especially important in the early months and can help you really get your business started on a solid footing.

 

Once you have estimated and calculated that initial figure, your options will soon become more clear. Do you think it’s possible to attract some investors by networking and attending conferences in your field? Are you comfortable reporting to them about growth and profits every month, quarter and year? Investors will be entitled to have a say in the business of your business. Sometimes, this is when clashes occur.

 

If this sounds like something you’re uncomfortable with, more traditional forms of financing might be your best option. The good news is that, as long you have good credit and your business plan is sound, a bank or registered credit provider will be able to offer financial assistance. Securing finance in this way means you’ll have more freedom when making decisions. On the other hand, you’ll have full responsibility for your debts and ensuring they’re paid back.

 

The basics of starting a business using loans

 

It’s important when thinking about your business financing to ensure all debts are incurred in the name of your business. It may be tempting to use your personal credit card every once in awhile, but it’s essential that you don’t stray down this dangerous road.

Even so, using any form of credit card, whether it’s yours or the business’s, means the lines are blurred between the money you actually have available for your use. You might not think it’s important to differentiate but your credit card limit may be more than the amount of money you need. And this means it could be very easy to abandon your carefully-planned budget and business plan. To ensure you stick to your plan, it’s important that you stick to only spending your initial capital and wait until you begin to turn a profit before spending on extras.

 

It might happen that your initial capital in insufficient

 

The first step is to cut down on your expenses. That means no more client lunches or staff drinks. Once you’ve cut down on your spending, you might find it’s time to speak to your bank.

 

Once you’re back on track, it might very well be time to purchase that equipment you’ve been renting. Whatever form of financing you’ve opted for to start your business, your success will be largely determined by your ability to plan, adapt to obstacles and remain on track during challenging times.

 

 

 

 

 

 

 

 

Should you really be an entrepreneur

Many people jump on the entrepreneurship bandwagon because they think they’ll be instant millionaires and get cushy working hours. But if you become an entrepreneur for the wrong reasons, you’re bound to fail. Starting your own business is hard work and requires guts and making sacrifices. If you’re not willing to understand the markets, have the courage to execute ideas and take risks, you could lose a lot of money as well as your business.

Here are a few ways to help you decide if entrepreneurship is for you.

Talk is cheap

Actions speak louder than words. If you’re a person who’s always focused on “someday” and can’t take initiative, entrepreneurship might not be for you. Entrepreneurs are go-getters who are always doing. They are determined to see their dreams come true.

When the going gets tough

Muhammed Ali, the champion boxer, was quoted as saying, “I hated every minute of training, but I said don’t quit. Suffer now and live the rest of your life as a champion.” And that’s how entrepreneurs should approach every difficulty they come across. If you quit easily, then you’ll fail as an entrepreneur. Because in business it’s not a matter of if the obstacles will come but when they come. Will you be able to take the heat?

Fearless

Starting a business requires a person who can take initiative and is courageous. You’re going to face a lot of situations which require you to take a leap of faith. And if you’re not brave enough, you’ll miss out on many business opportunities.

Overnight success

Many people think they’ll start raking in the millions in the first year. But the climb to success isn’t easy and will require a lot of work. As an entrepreneur, you may not see the fruits of your labour until a later stage. Entrepreneurs have to know, in order to get a breakthrough in their business, they need to be persistent and motivated.

Lonely at the top

When you’re the CEO of a business, you’re the one in charge You’re the one who has the final say and the one who is the most invested in your business. So you may find it lonely because no one in the company truly understands the pressures you face. There are few people to share in your failures and to motivate you to get up when you’re down. Being your own boss and working for someone else is very different, as an entrepreneur your business is constantly on your mind.

Focus

You might think your idea is unique, mind-blowing and everyone will be queueing to get their hands on it. But not everyone will buy into it. However, you shouldn’t let this deter you. Colonel Sanders who started Kentucky Fried Chicken was rejected 1009 times before he found someone who believed in his recipe.  In the beginning, some people may not be on board to help you fulfill your vision. And that’s why you should be determined and focused.

Preparation

Luck is when opportunity meets preparation. You have to be ready at all times and have your ducks in a row, otherwise, you could lose out on great business deals. If you aren’t prepared to spend hours studying your industry and looking for other ways to serve your customers, then being an entrepreneur might not be for you.

Capital

Whether you need funds to finance your mining equipment or invest in new property for your business, you need to find clever ways to raise money. You might have to get a business partner or explore crowd-funding. Whatever route you choose to take, it’ll take a lot of hustling to get your capital. And the question is: are you up for it?

Time

Many people have a preconception that they’ll spend their days clocking off at noon to play golf because they have flexible working hours. But the truth is, being an entrepreneur means you’ll have to work harder than anyone in your office. In fact, you’ll find yourself wearing many hats in order to keep your business thriving. You’ll have to eat and sleep your business and often spend the weekend catching up on work. You may also have to sacrifice time with your friends and family during the initial stages of building your empire.

Listen

If you can’t listen to what others have to say, your business could fail. As a business owner, you’ll come across many unsatisfied customers. And if you want your business to prosper, you’ll have to listen to what they have to say in order to satisfy their needs successfully.

Being an entrepreneur is about more than becoming your own “boss”, it’s about loving what you do and providing a product or service which will benefit your customers.

 

4 ways to finance your business

Starting your own business is an exciting endeavour. Introducing a new product or service to the market and designing your own future are why many people enter into the startup game. But there are many mundane sides that should be addressed before starting out. One of them being the funding of your business to facilitate growth.

The first step to getting funding for your business is to have a solid business plan. There are specific categories that need to be included within a business plan to receive funding. These categories include the company’s description, market analysis, organisation and management plan, detail on the value proposition and marketing and sales plan. If you’re interested in financing your business with outside capital, a funding request and financial projection should then also be included. And once all the required information is gathered, it’s time to approach a creditor.

Whether you’re looking for startup funds or capital to expand your business, it can be challenging to find finance in any economic climate.

Here are four financing techniques and what to know when approaching them. .

What is factoring?

It’s a finance method where a company sells its receivables at a discount to get money up-front. It’s used by companies with poor credit or businesses such as apparel manufacturers. But this is an expensive way to raise funds. If your company sell its receivables, you’ll generally pay a fee that’s a percentage of the total amount. If you’re, for instance, paying a two percent fee to get funds thirty days in advance, it’s equal to an annual interest rate of about 24 percent. And because of that, the business will have a bad reputation over the years. Businesses are forced to look for alternative financing methods and many big companies are trying to make factoring more competitive. These exchanges will allow businesses to offer their receivables to many of the factoring companies at once.

Make use of a credit card

Startups are likely to use credit card financing to get their businesses off the ground. And that’s because owners of startups don’t yet have business credit. Their own personal credit is all they have. If you make use of your personal credit card to find your business, you’ll be responsible for any debt you incur. 

Making use of a personal credit card for financing your business means taking on a significant amount of risk. If you fall behind on your payment, your credit score will be exhausted. And if you pay the minimum each month, you could create a hole you’ll never get out. But if you use a credit card responsibly, it can get you out of the occasional jam and even extend your accounts payable period to shore up your cash flow.

How about an angel investor?

Angel investors are individuals with business experience who use their own money and invest in startups. They usually invest in companies who’ll turn a large profit quickly. When pitching an angel investor, you should be succinct, avoid jargon and always give an exit strategy.

If you want to win over an angel investor, you should add people with experience to your management team. Even an unpaid but experienced adviser could increase your trustworthiness. Did you start your company because you want to cash in on the latest trend or because you’re passionate about your idea? Angel investors will spot the difference and won’t give much attention to companies interested in get-rich-quick schemes.

You’ll need market assessments, competitor analysis and robust marketing plans if you want success and expect to get anywhere with an angel investor. Even though you’re a startup, it’s expected that you can demonstrate expert knowledge of the market you’re about to enter.

Approach family and friends

If you’re looking for ways to finance your startup, asking family and friends will be the easiest way. But remember when you turn loved ones into creditors, you’re risking their financial future and could jeopardise your personal relationships. A typical mistake is approaching loved ones before a formal business plan is in place. It’s important to supply formal financial projections. And with that, give an evidence-based assessment of when your loved ones will see their money again. It’ll reduce the likelihood of unpleasant surprises. Your investors will also know you’re taking their money seriously.

It’s important that you discuss the possible risks involved. Offer a strong and detailed business plan but make sure they’re realistic about the risks involved.

You should look for creditors offering a wide range of equipment finance packages for companies, regardless of whether they’re in their early stages. There are many other ways you can finance your business, whether you approach an angel investor or family and friends. If you want to build your business up for success, the key is to have a well-detailed business plan.

Tips for making your business’ finances great

There’s no time like right now to start making your business’ finances great. If you’ve been thinking that you could be doing a little better when it comes to business finances and expenses, now’s the time. There really is no better time than the present to put in place good financial habits. You might be thinking that you can wait until next month or, even worse, next year. But it really would be beneficial to put more thought into spending and saving your business’ money.

The only way to really make new habits stick is to become committed to these ideas now. Experts on habits are unanimous on this. If you’re going to make new habits a part of your life, you need to start immediately. Not tomorrow, not on Monday, not on the first of the new month and not on January 1. These are just random future dates. Your habits won’t immediately stick just because you started on those days. Here are some tips to help you really change your habits.

Start planning

You need to have a plan for your business to be successful. You can’t just hobble from one crisis to another, or from one big win to hoping for another. You need to have defined goals for each day of the week, month and year. You need to know what you’re doing and why. Otherwise, you’re just reacting to whatever’s happening around you rather than being the person in control of your business. It’s important that you also regularly assess your goals and make sure you’re still working toward them. Without setting goals, you’ll spend your days running from one crisis to the next. And that’s no way to do business.

Get organised

There’s not much point in doing all that planning if you’re not going to actually make your plans a reality. If you don’t do that, you’ll likely be spending time and money on tasks which aren’t beneficial to your company. “If you fail to plan, you plan to fail,” said US founding father Benjamin Franklin famously. And he couldn’t have been more right.

Set a budget

They have a bad reputation. But they don’t deserve it. And setting one might not seem like the most fun task, but it’s essential. It’s incredibly important that you know what money’s going out and what’s coming in. By creating and sticking to a budget, you can find the line items which can be cut so you can slash your operating expenses. In the same way, by doing this, you’ll know if you need to apply for financing like machinery asset finance.

Hire the right people

You might be tempted, at the beginning, to hire the most affordable employees. But sometimes staff members are cheap for a reason. There’s a very fine line between hiring inexperienced people who won’t cost much and more experienced staffers who are a little more expensive. And there isn’t always an obvious answer about which you should choose. You need to approach each situation individually and see what’ll work for your business.

Trust people to help you

As the company owner, your time is more expensive than anyone else in your company. And that’s why you should trust them to do some of the work. The smaller tasks of the day can be assigned to other, more junior employees. You need to focus your time on activities which bring money to the business. If a task or activity doesn’t do this, it shouldn’t be your priority. Yes, it can be tough to let go of the reins. But, sometimes, that’s exactly what your business needs.

It’s essential that you think carefully about your business’ goals and your habits in making sure they see the light of day. We spend a lot of time talking about personal goals but setting these for business are equally important. After all, goals for your business should have one outcome, its financial success. And, of course, you want that.

So, keep these habits in mind and make them a part of your daily life now. You’ll be thanking yourself tomorrow, on Monday, next month and next year.

Asset finance companies in SA you should be looking at

Whether you’re creating a startup that will be able to disrupt every industry imaginable and change the face of the world, or a factory that prints t-shirts, you’re going to need some assets. Your company will need PCs, lots of machinery, or just printers in order to get it off of the ground, and thankfully there are a lot of asset finance companies in South Africa.

As the founder of a brand new company, or someone with an idea for one, you probably don’t yet have the financial backing to afford everything your business needs. There’s where these companies come in order to help out businesses. Think of them as bankers – well some of them are – who create flexible options to either rent or lease the equipment you need.

Below is a list of some of the companies you should be looking at, and in no particular order.

Spartan

A private company that was established in 1981, Spartan only finances small and medium enterprises (SMEs) and nothing smaller or larger. The company looks at applicants that have been trading for over three years, and have between 10 and 50 staff members. Spartan covers asset financing for machinery, specialised equipment, technology, software, and fit-out (office furniture) finance.

WesBank

This sister company of FNB not only covers asset finance for businesses, but personal finance for cars, loans, and leisure items. WesBank is more lenient when it comes to the size and state of businesses and offers customers the choice to purchase or lend assets as payment options. Some of the sectors that WesBank offers finance to includes mining and construction, fleet, agriculture, IT rental, and transport and aviation.

Standard Bank

Much like WesBank, Standard Bank also offers different asset finance options for personal and business clients. The bank supports financing for manufacturing, mining equipment, aviation, and the technology sector.

First Asset Finance (FAF)

A sister company to First Health Finance, FAF tries to differentiate itself from competing companies by offering better services and a faster turnaround time. The company doesn’t have any limits on transaction size and offers operating rentals, rent to own, instalment sales, and secured medium term loans solutions. The company supports a range of industries, from energy and marine to construction and printing.

Mercantile Bank Limited

A subsidiary of Mercantile Bank Holdings Limited, Mercantile Bank focuses on business and commercial banking solutions to local and international customers. The company offers leasing, installment finance, and rental finance to companies for assets such as motor vehicle, fleet, and capital equipment.

ABSA

One of the oldest banks in SA, ABSA, like its competitors, offers a range of asset finance management solutions to customers. ABSA offers asset finance to the same sectors as others on this list, but also gives the example of financing trains. Its differentiator to many others is the Islamic Vehicle and Asset Finance option.

Nedbank

What is there really to say about another bank offering an asset finance solution to businesses? While Nedbank offers mostly the same things, it also includes Full Maintenance leasing to facilitate vehicle administration, and Managed Maintenance to facilitate with vehicle downtime and administration.

The Rental Company

This aptly named company comprises of staff who have been in the active players in the office equipment rental industry for over 16 years. Some of The Rental Company’s clients include Coca Cola, FNB, ITEC, and Nestlé, which means they must be doing something right.

Utho Asset Finance

This is a wholly-owned subsidiary of the Utho Investment Holding (Pty) Ltd, which is 100% black economic empowerment company. Launching in 2004, Utho offers asset finance in technology, office automation, software, and more. The company looks to offer flexible payment solutions to customers.

Other options

Besides standard asset finance solutions, there are a range of other options out there thanks to the financial technology startup boom. If you’re confident that your company will be able to pay back a large loan in a short amount of time, then options such as LulaLend exist, which specialises in short term loans.

For those who want to shop around, there’s also RainFin, which is a loans marketplace that lists many different loan options. The company used to be part of Barclays.

A solution to fit any business

There are a range of asset finance options for almost any company in SA, whether you want to deal with a bank or a wholly private entity for your needs. While many of these companies may look the same at face value, each one offers some or other unique way in which it can help your business grow. Be sure to always enquire about what is on offer and will suit your needs.