Financing a business is one of the hardest things any entrepreneur will ever have to do – and many never find the funding they need to get started externally. If you are determined to get started though, there are ways to whittle down your budget, so that you can redirect money you’re already spending into a business start-up fund of your own!

Let’s look at some common household expenses, and how you can shave some money off them to spend on your business.

Housing or Accommodation

If you’re renting a home, then you can save money for business finance purposes by considering a smaller home or a home in a less costly area when your lease is up. If you live alone, and you have a spare room, then you might be able to get a room or house mate, to cut costs.

If you own your home, then there may already be equity in your home that you can access. If not, you also have the option of taking on a boarder, and cutting down on costs, and if you don’t want to share your home, how about renting out your garage as storage space?

Meals and Entertainment

Meals and entertainment are another area of your household budget that often contains hidden money that you could use for business finance.

Make it a rule never to buy anything that’s pre-packaged or processed. You’ll save a bundle, and you’ll be healthier too! When it comes to entertainment, remember that a couple of bottles of wine at home are always cheaper than cocktails in a bar, and you won’t have to pay for a taxi home either! Likewise, DVD’s on your couch is cheaper than movies, and the beach or a park is a better option than costly outings.

Insurance, Communications and More

You’d probably be surprised to realise that you’re almost certainly paying more than you should for insurance, cell phone and telephone bills, utilities and other monthly expenses.

Checking to make sure you’re not over insured, and taking the time to phone around for better prices from all of the companies you buy monthly services from can make a huge difference to your budget, and can save you money to put toward business financing.

Your Car

If you’re driving a big car, and you’re not transporting several people in it, you’re probably paying too much for the car and the fuel you use. Consider trading it in for a smaller, lighter, possibly second hand model, or even better, use public transport to get where you need to be (at least most of the time!)

Transport costs add up quickly, and you may just find that there’s a significant amount of money to be saved here.

You’ve Whittled Down Your Budget – Now What?

If you’ve done all the things mentioned above, and any others you can think of to save money, you may have as much as 10 to 20% of your usual monthly expenses to redirect to business finance.

Either you can use it as you save it, and start your business small, or you can set up a high interest notice account, that you can save the money in and access it once you’ve built up a sizeable amount.

The good news is that it’s almost always possible to start a business without outside funding, as long as you scale your business plans to suit, and you are careful with money. You might not be able to start off the way you would like to, but it’s often better to start with no loans hanging over your head, and to have the freedom and autonomy that self funding brings!

If you are looking for an investor for your business plan, you probably don’t think much about where the money comes from – as long as it comes!  However, there are a variety of different methods of finance, and each has it’s own distinct pros and cons.

So if you are in the market for a business investor, and you aren’t sure how the various types of deal work, read on, and make an informed decision when the time comes.

Traditional Debt Finance

Traditional debt finance is the first type of investment that most business owners think of when they are looking for investors to fund their business ideas.  This type of investment is your standard bank loan, and it comes with the usual monthly repayments, as well as interest.

Aside from the worry of having to pay that loan back while you’re working on starting your company, you also need to remember that often, you will need some form of collateral to secure this type of loan, and that banks around the world have tightened up their lending criteria, so it’s got a lot harder to get business finance!

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You’re probably very aware that the world has just emerged from a recession, and from what was known as the credit crisis. You probably also know that the global economy is still on somewhat shaky ground.

If you’re hoping to start a small business in this economic climate, read on, because in this article, we bring you our tips for small business finance in a tough economy!

1. Look for business ideas that service basic needs, and the lower end of the market. Most financiers won’t be particularly interested in investing in businesses that provide luxury goods or services that most people can’t afford!
2. Offer surety. It will be a lot easier to find business finance in a tough economy if you have capital of your own, or something to offer as surety. Try to save up your own capital, or consider using fixed assets, like your home, to sweeten the deal for investors.
3. Scale down your plans. Look at your business plan, and consider how you can scale down your plans, and apply for less financing. This is particularly important if you’re going to be approaching a traditional lender, like a bank. Remember that they tend to tighten up their lending policies during economic crises, so you might not be able to access the same amount of funding.
4. Make sure that your business plan is watertight. Financiers may overlook small errors when times are good, but during a recession, or any other type of economic crisis, lenders will examine your business plan with a fine toothed comb before offering you business finance. So make sure your plan is completely watertight before you apply.

It’s certainly going to be harder to access business finance during a recession or an economic crisis, but it’s not impossible. It may even be a blessing in disguise, since the need to be frugal while you’re starting your business will probably set you up for a lifetime of careful spending, and that’s usually great for your business!

Business Benefits of Recession

The good news is that if you do manage to access business finance during a recession, or in a tough economic climate, there may be advantages for your business. In fact, some of the world’s largest and most successful companies were started during a recession, and even during the Great Depression! Some of the benefits to your business are:

• Less competition. During an economic crisis, businesses tend to go out of business. If you find the right products and services to fill the void – at the right price – you may find that it’s easier to do business, and you have less direct competition.
• Bargains on equipment and tools. Another benefit of starting a business during an economic crisis is that all those businesses that are folding will probably be selling or auctioning tools and equipment, and you can usually find bargain deals on the things you need.
• Greater negotiating power. Your suppliers will probably also be feeling the pinch, and that will probably give you more negotiating power. You can use that to negotiate better prices, or better payment terms.
• Cheaper prices. In most cases, during a recession or economic crisis, suppliers will automatically look for ways to supply goods or services at better prices. That will mean that it should be cheaper to operate your business if you start up during an economic crisis.

It’s clear that you can not only access business finance during an economic crisis, but that it might even work in your favour. So if you’ve been thinking about starting a business, don’t let the economy stop you. Plan accordingly, and you should find that you can still achieve your business dreams and goals.

If you’re trying to start a small business, have a great business plan and finding that getting business finance for your idea or company is a lot harder than you thought it would be, you’re probably frustrated. However, there are a few good reasons why business finance is so hard to find, and in this article, we look at what they are.

The Economy

Unfortunately, as you probably know, the world has just emerged from a major recession. Not only that, however, but there’s been a global credit crisis, with many banks, financial institutions and even countries declaring bankruptcy. That has meant that traditional lenders around the world have had to tighten up their lending policies, and that’s one of the main reasons that business finance through traditional lenders has become so hard to access.

Stiff Competition

Of course, there’s also always been a lot of competition among potential entrepreneurs and small business owners, and the fact that there’s now less finance available means that it’s even more competitive.

Add to that the fact that many people who were laid off during the recession are also trying to start small businesses, and you begin to understand why you’re competing against so many other entrepreneurs!

Changes in Business Lending

Even though there are more and more people seeking business finance these days, fewer of them are seeking traditional financing for their business. More are turning to venture capital and other types of business finance, but they have very different criteria.

In fact, because venture capitalists want to make a lot of money, quickly, they rarely look at companies looking for anything less than several million dollars. This means that if you’re just looking to start a small family business, you won’t be able to access that type of finance.

Stricter Requirements and More Sophisticated Lenders

There probably was a time when getting business finance was a simple matter, of having a good idea, and visiting your bank manager.

These days, however, lenders are far more sophisticated, and you’ll have to have, at the very least, a professional business plan. You’ll probably also need to have a registered company, existing marketing materials, a team of whiz kids, and a whole lot more if you want to impress today’s lender.

It’s exactly because of that that so many potential small business owners decide they don’t have what it takes to apply for business finance, and shelve their business ideas.

Scams, Schemes and Shady Characters

The final hurdle you will have to face, as a potential entrepreneur seeking business finance, is learning to distinguish between genuine financiers, and the people out there who are looking to take you for a ride.

As the world moves closer towards being a true global village, fraudsters from around the world are able to target more people than ever. Because those unscrupulous people know that people seeking business finance are usually desperate to get it, there are plenty of individuals and organisations that are targeting them. You will need to learn to identify those people and organisations, and avoid them. A good rule of thumb is to avoid any business finance offers that require you to pay an ‘administration fee’ upfront. They’re usually just people who will take your money, and disappear.

Reading this article, you could be forgiven for thinking that finding business finance for your company is impossible. It’s not, however, and entrepreneurs that have what it takes to succeed in business (a great idea, creativity, and determination) will almost certainly find some way to start their business – whether it’s business finance through traditional means, or bootstrapping their company into being. Stick to it, and you will find a way!

When most of us think of business funding, and start-up capital to fund our business plans, we think of traditional bank loans, venture capital, business grants, or angel investors. There are, however, alternative methods of business funding that most people do not even realise are an option, and in this article, we look at what they are.

Micro finance

If you are only looking for a small amount of start-up capital, then microfinance may just be an option for your company. Micro lenders typically lend out smaller amounts than banks or traditional financiers, and while they do charge more interest, they are also more likely to offer finance to higher risk individuals.

If you do opt for micro finance as a method of business funding, minimise the interest costs by borrowing as little as possible to get your business started, and try to accelerate your repayments.

Starting a Service Business First

It is a fact that service businesses (like consultancies, independent contractors and others) require less business funding to start than manufacturers or retailers. Whatever your business field, look for opportunities in your industry to start a service business that you will use to build up the capital you need to start your ‘real’ company. Offer consulting services to people or companies in your industry, or create a digital product, that you can sell to earn the capital you need.

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If you have a small business, and you would like to expand, then you probably think that you will need to find outside capital, in the form of an angel investor, venture capital, or a bank loan in order to do so.

However, if you are in the manufacturing sector, or even a service provider, who sells to the public sector, then selective invoice factoring, or reverse factoring, may be another funding option for you.

What Is Reverse Factoring?

One of the main reasons that reverse factoring is not used more often to fund small businesses, and improve their cash flow, is quite simply that many people don’t know what it is, or how it works.

Reverse or selective invoice factoring, in the simplest possible terms, is a system that allows you to borrow capital from a third party, based on and secured by your unpaid invoices.  This type of funding can allow you to secure as much as 80% of the invoice value in capital, that you can use to fund the materials and other items you need to complete the project or order.

What Are the Benefits of This Type of Funding?

One of the primary benefits of this type of funding is that in many cases, even small businesses with less than perfect credit records can apply for it.  That’s because companies that offer this type of funding base their assessment of the credit worthiness of the deal not on your credit rating, but on that of your client.

That means that if you are doing business with a large and reputable company, the company that is considering you for funding through factoring will consider their ability to pay their invoice, when deciding whether to proceed with the deal.

Factoring companies often also take over the collections function on invoices that they have factored, which means less work for you in collecting payments from your customers.

Once the invoice is paid, the company who providing the factor funding will deduct the money that they have advanced you on that invoice, as well as their fees (usually a percentage of the value, calculated per day for the duration of the loan) and pay the remaining funds to you.

This type of finance for small businesses is particularly attractive, because in most cases you can obtain funding based on a formal written order from your client, and that means less worrying about how you will finance production.

The final notable benefit of reverse factoring as a source of funding is that you can choose the invoices or projects that you want to finance in this way.  If you only have one or two large orders that you need capital to complete, then you need only factor those invoices, and retain the sole right to the remainder of your ledger.  This offers more flexibility than traditional finance.

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With the current situation of the economy and recession, 2010 saw many small businesses liquidate as well as large corporations downscale their staff to the minimal. Hence, many skilled tradesman have ventured into their own small businesses, backing their own business plan and personal commitment to make the idea a reality. Banks are not easily offering loans and it is becoming more difficult to secure business finance. Start-up capital is often a necessity to get off to a good head start with my business venture.

Business finance in South Africa, as many other parts of the world has become an increasingly sought after and often scarce resource for entrepreneurs. The thought process behind this from the banks perspective is now well known and much discussed and for many entrepreneurs seeking finance, business angels and virtue capital firms have become a sought after option. Business angel investors often provide the first significant outside capital invested in start-up companies. After an entrepreneur or team of entrepreneurs identify a business opportunity, and exhaust their own resources, they often turn to business angel investors to keep the venture growing. Without this capital, many new ventures simply cannot grow.

As entrepreneurs create new opportunities, some ventures show great promise and growth, and some of those will require additional capital. That capital can be provided in the form of debt or equity, but new venture risk is usually something that the banking industry avoids (with the exception of the credit card industry). Formal venture capital and business angel investors help meet this investment need of new ventures, a role that is uniquely important at a time when credit is particularly tight.

Angel investors are often more likely to get involved at the early stages of start-ups which many of them fund exciting and forms part of the reason why they are investing in businesses in first place. They want to get involved in the business and support the owner on the start-up and growth sages of the business. Because of the nature of their interest and resources a at their disposal this also makes plenty of the business sense as their relatively low investment at the early stage can secure them a healthy share of the new companies equity. They have become an increasingly important source of equity finance over the last decade for new and nascent businesses as venture capital investors are not able to accommodate a large number of small deals with their attendant due diligence and oversight needs. Business angels are now prominent coinvestment partners in the early-stage market.

Venture capitalists are more likely to invest money once the business is established, providing greater monetary amounts in return for shares in the business, and sometimes a role in the company, usually at the board level. Venture capital firms are more likely to take on high investment opportunities where the return may be equally attractive in order to justify the risk being taken in the first place. So as a small business or entrepreneur, this is something that you and your business angel may consider at a later stage of your business.

Angel investing is becoming more popular in South Africa. Contrary to media reports about the lack of accessibility to private investors and their inability to fund new businesses, South Africa still has its economic obstacles to overcome - fairly high everyday living expenses and a high unemployment rate - investors are trying their utmost to bring more business into South Africa, since investing is the only way to revive an economy.

Traditionally the world of Venture Capital and Angel finance has been dominated by men. I cant think of a justification for this as after all, apart from investment itself, the entrepreneur needs attention, support, understanding and someone willing to listen. Many of these requirements of course live within woman and apart from that , the fact is that both entrepreneurs and business plans are increasingly coming from the fairer sex. So with not enough startup funding reaching female entrepreneurs, a new program has begun with the mission of creating more female angel investors.

Although just as many females are starting businesses as males, only 11% actually receive startup funding from angel investors. According to the Center for Venture Research at the University of New Hampshire, women don’t seek out capital at a high rate and when they do, they are often looking for women investors. The problem is that female angel investors don’t exist in large numbers which makes them hard to find and the amount of money they have available much smaller.

Natalia Oberti Noguera, a 27-year-old Yale University graduate wants to change that. Natalia is the founder of the Pipleline Fund, a New York based venture capital firm who invests in socially responsible business models. She started the Pipleline Fellowship Fund which aims to increase the amount of female angel investors and steer even more money towards socially responsible businesses.

The Pipleine Fund is a boot camp, of sorts, for aspiring angel investors. Natalia has been taking applications from aspiring female angel investors since November for a program that will begin in January of 2011. The 10 trainees she selects will pay R1,000 to be part of the program plus another R5,000 of angel money. This money will be pooled to make an investment fund of R50,000. The women will pick one company in which to invest their combined R50,000. The group plans to hand out this money in the Spring of 2010.

Each woman will be paired with an experienced venture capitalist where they will learn the in-depth act of due diligence, valuation, governance, and the many other aspects of evaluating a company for possible investment. While many venture capital firms split the duties between the partners, this company puts all responsibilities on all members. Each person is trained so they can leave the program and go out in to the world and start a firm of their own.

Vanessa Wilson runs a program similar to the Pipeline Fellowship Fund called the Golden Seeds Academy. This program has grown so large that they lend R4 million annually to women investors. If Golden Seeds is any indication of the upside potential of the Pipleline Fellowship Fund, it won’t take long for this new program to be a major player in the world of venture capital.

The problem may be that there simply aren’t enough programs like these but as ideas like this catch on and become more well known, they are sure to generate more interest and create a new breed of female angel investors.

South Africa is seeing an increasing amount of business finance activity especially in the entrepreneurial sector with wealthy funders, known as venture capitalists, starting to pour millions into local technology start-ups. It is a world-wide trend that is quickly catching on here in South Africa. Initiatives such as Silicon Cape is ensuring that the area supports promising business plans from local entrepreneurs, much in the same way as it is happening in the well-known Silicon Valley area of the US. A strong entrepreneurial sector in any country really forms the foundation of a healthy economy in any country, none more so than in South Africa. And now some of the country’s wealthiest and also well-known business men are playing there part in ensuring that start-up finance is available.

Interesting article in the Financial Mail (http://www.fm.co.za) tells the story of Justin Stanford, a 24-year- old high school dropout went to ask SA billionaire Johann Rupert to invest in a start-up technology company. He got R8m in venture capital, a form of seed funding.

Stanford was no chancer. By the time he met with Rupert, he had failed and succeeded with several technology based businesses — he was already a millionaire at 21. Luckily for him, asking Rupert for financial assistance was not an impossible hurdle. Rupert’s personal wealth is estimated around R16bn, according to Forbes, and his listed Swiss company Richemont Compagnie has assets of R71bn.

Stanford had direct access to Rupert, having attended the same high school as the Richemont CEO and chairman’s son. It also helped that Rupert had been aware of his entrepreneurial exploits for some time, as word had spread of his activities in the closely knit Stellenbosch community.

Stanford needed funding because his latest project, a cellphone encryption service, was stretching even his finances. Stanford had become a mentor to Cape- based techies who wanted to commercialise their inventions . One of these bright young minds was Malan Joubert, who had been tinkering with electronic encryption since high school. He was barely out of his teens when he approached Stanford with a concept that would make transactions over a cellphone more secure.

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Its that time of the year again and business plan entries to the 2010 Entrepreneurship competition has been flooding in to Banwidth Barn, a Cape Town based business incubator who are the organisers for this years event. Entrepreneurs with exciting business plans has been urged to present them at the competition with attractive prizes on offer.

Recently announced by Cape Town Business news the opportunity for fast-tracked access to funding, mentorship and global exposure has opened up for Cape Town entrepreneurs, with the launch of the third Cape Town Entrepreneurship Competition. The competition forms part of Cape Town Entrepreneurship Week, which runs from 15 – 21 November, coinciding with Global Entrepreneurship Week.

The competition focuses on technology and innovation in the fields of biotechnology, telecommunications and media, information and communication technology (ICT), ‘clean’ technology, healthcare, and social entrepreneurship.

“Our previous winners have benefitted from competing in a global competition, and networking with a range of people and organisations. It is clear that this competition can play a vital role in identifying talented entrepreneurs who have the potential to build high-growth businesses,” said the City’s Executive Director for Economic, Social Development and Tourism, Mansoor Mohamed. Mohamed is also a Global Nominating Member for the Global Entrepreneurship Competition.

This year, the winners of the Start-up and Growth tracks will each receive R50 000 in prize money, while the Idea Track winner will receive R25 000. Apart from the cash prizes, the winners will also be considered for participation in further enterprise development and training programmes offered by the City of Cape Town’s various partners.

The competition opens for registration on 07 October 2010 and business plans must be submitted by 15 December 2010. Entrepreneurs wanting to enter can do so from 07 October at www.ctec.org.za. Entry is only available via the online entry form. The winners are expected to be announced by February 2011.

The competition is being managed by the Bandwidth Barn, a leading ICT business incubator and one of the City’s strategic partners. CEO, Chris Vermeulen, says the competition is set to become a flagship annual entrepreneurial event, reflecting the City’s focus on high-impact entrepreneur development.

With entrepreneurial opportunities being an exciting avenue for many for channelling their creative energies and ideas while having the opportunity to create substantial wealth, the competition will have no shortage of interested entrepreneur throwing their hats in the ring.

As a new entrepreneur with a business plan, looking for business finance from an angel investor, its crucial that you understand what it is that the investor will look for before making their investment choice. In the same way that it many be unthinkable to start a business if you are not clear on the benefits that your product or service will be offering prospective clients and the specific needs that the service is offering a solution to, understanding the needs of the angel investor is a crucial step towards attracting the financing that your business may need.

The value of attracting the right investor to your business may be enormous. You are not only benefitting from the capital provided, but almost more importantly, you are gaining a huge amount of experience and access to contacts that your business will need going forward. Investors can help take a business forward by leaps an bounds and knowing what they are looking for will help you get your venture the capital it needs.

Most of the below issues will be includes in an effective business plan and may be provide key answers to questions that the business angel may have. The most important things an angel investor will want to know are:

Do investors provide business finance to ideas or the people behind the idea? An interesting questions and certainly one that has received much debate at a recent networking meeting between business angels and entrepreneurs in Johannesburg. Most investors would tell you that it’s the idea that they are interested in but if you look at the ideas who receive investment and the people behind them its often easy to identify why one idea received funding and another, not.

In our business plan workshops I often make this point very specifically to the attendees that a key are of the business plan will be the people who are behind the business. You are as much selling the entrepreneur as you are selling the actual opportunity. Take it as you which but the fact is that deals are done between people. Yes the idea may be a great one but as the investor I’m looking at the person who I will be working with, what are their qualities, are they someone who can take guidance, are they argumentative (not always a bad thing by the way), are they creative, do they have contacts. All these issues have to come into play.

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Historically many entrepreneurs and business owners have seen private equity funds as the barbarians at the gates. Today Private Equity for Entrepreneurs is a real possibility with these firms already owning huge chunks of industry, including Whitbread, Weetabix, Medikredit, and KwikFit. South African private equity firms raised at least R 100 00 billion in 2008 and are often BEE compliant. They are said to be risk averse, but do take risks and not all their investments pay dividends - or survive. The point is, with record sums to invest, can start-ups and existing smaller ventures count on this form of investment to raise business finance?

So what does private equity firms look for?
·    Return on investment – normally at least around 40% return – So high growth to you and me!
·    People with vision, self-confidence, drive and energy, with aspirations to grow the business;
·    A clear team leader and team with complementary expertise, such as management, marketing and finance;
·    Market knowledge, a growing market, or an innovative product;
·    A product or service with a competitive edge or unique selling point; and
·    An exit route, that is, a chance to sell the shares within five to seven years, either back to the business itself, to another investor, or to the public by a listing on a stock exchange.

Let's assume you've got a great idea for a new business, but it needs serious funding - well into six figures. Can you count on your bank's support? Is venture capital a more likely route? Or private equity funding? What about business angels? How do you find them and choose the best one?

Angel finance services has become increasingly important to South African entrepreneurs in in recent times.  With both business owners and entrepreneurial observers alike considering angel investments to be one of the key drivers behind the startup and the growth of new businesses in the country, despite a shortage of information to confirm whether or not this is true. Unlike venture capital, angel investments are made by individual investors who do not make up a known population. Therefore, much of what is reported about angel investing comes from anecdotes and surveys of convenience samples, which are prone to biases and inaccuracies. Moreover, research on angel investment is plagued by definitional confusion, in which different investigators confound informal investors, friends and family who invest in startups, accredited and unaccredited angel investors, and individual and group investing.

The term "angel" comes from the practice in the early 1900's of wealthy businessmen investing in Broadway productions. Today "angels" typically offer expertise, experience and contacts in addition to money. Less is known about angel investing than venture capital because of the individuality and privacy of the investments.

Thus far the investors network team has been able to collect the following information on angel investors in South Africa.

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As an entrepreneur you will already be aware of the challenges you face when it comes choosing the most appropriate financing for your business.  Insufficient financing is one of the most common killers of potentially great small business start-ups.  Whether an entrepreneur is expanding a business or starting a new one a major choice must be made regarding how to obtain funding. As an entrepreneur or business owner the key starting place will be to draw up a reliable business plan which considers all the issues relating to the business and it's market. Once this is done you will have a clear picture of the financing needs of the business as well as the leverage you will have from a business point of view with which to negotiate with potential investors or lenders.
 

All funding sources will want to see the right people driving your small start-up business.

Choosing Between Debt & Equity Financing
 
Most small or growth-stage businesses use limited equity financing. As with debt financing, additional equity often comes from non-professional investors such as friends, relatives, employees, customers, or industry colleagues. However, the most common source of professional equity funding comes from venture capitalists. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries. The high-tech industry of California's Silicon Valley is a well-known example of capitalist investing.

Once you have created a business plan the next key step of course will be to sell your plan and idea to a potential funder. Weather the funder is the bank or an investor, the key thing is that in order to convince them certain issues needs to be mentioned in the plan and you need to be answering the key questions that the investor may have in their mind.

The first and most important issue for any investor really will be, is this business viable? Is this a real opportunity based on facts and is there any evidence, and this can be in the form of marketing research or a number of other pieces of evidence, that shows that the business will generate a return. Although investors will be looking for opportunities for various reasons, a key issue for just about all investors will be the potential return on investment that they can expect or work towards.

There are of course many ways of raising money to fund a company. With the internet and "instant ompanies" as we have discussed in previous articles, you don't need much money to start a company. Many companies you can start with little or no start-up costs at all. There are even many  advertising resources on the internet from classified ads to press releases to link exchanges that make advertising on the internet free. As for print advertisers, many of these are discount.

The launch of our Investors Network Blog halfway through 2009 has proved to be a good move and many articles are continuing to attract large number of readers from both enterprise investors and entrepreneurs alike. Here are top ten articles:

1) What options are there for funding a small business?

Whether starting a new business or growing an existing venture when it comes to business finance its crucial that you understand the options available to you for funding your business.

Equity based finance is of course not the only option when it comes to raising money for your business. Here are a few other options that you may want to consider:

Click here to read the full article.

2) Raising finance for a new business

Raising finance for a new business is often the most challenging task of the entrepreneur. No one enjoys asking others for money (well almost no one) and going hat in hand to your local bank or investment firm is perhaps similar to a trip to the dentist. But it does not to be that hard. Raising funds should be seem as your first real opportunity to see whether you fist of all can communicate your idea effectively an secondly whether other professionals see the opportunity in the same light that you do.

Click here to read the full article.

At a recent meeting with a bunch of new entrepreneurs looking for funding we recorded some of the conversation to help with answering some of the basic questions that many of you may have when starting your business.

The started questions is of course, what are my options when looking for money with which to started my business?

The answer to this question can be found in one of our earlier blog posts by click on this link.

To go into a bit more detail on the various forms of business finance see the questions below:

Q: What are my options for funding if I dont want to go to the bank?

The South African government is increasingly being asked to do more in support of small businesses when it comes to business investment and start-up capital. Although the government is already investing substantially into the small business sector more still need to be done.

The benefits to the government are obvious and difficult to ignore. Small firms provide job opportunities, much needed competition in the key areas as well as of course tax revenue for the government. Investing in new and growing firms is almost a no-brainer for the government and can only help the economy going forward.
Investment is small firms does not necessarily need to be in the form of cash only. Great examples of how this is done in countries such as the US, the UK and Europe where the sme sector is healthy and thriving includes, tax breaks for new firms, popular loan guarantee schemes where the government under writes a large percentage of loans giving out by banks and a reduction in regulations in certain key areas specifically relating to micro businesses.

SINCE 1994, the South African government has invested significant political capital in the support of small and medium-sized enterprises (SMEs). This is because SMEs are recognised as key contributors to both growth and employment, contributing 30% of the country’s gross domestic product and almost 70% of private-sector employment. Government intervention in this sector has included the provision of wholesale finance and nonfinancial support services. The 2005 and 2006 budgets have also given support to SMEs through the tax system, streamlining VAT procedures and raising qualifying tax thresholds for small businesses.

But while there is government support at the company level for SMEs, there is practically no government support for private individuals wishing to invest in small businesses. In many developed economies, private investors are able to take advantage of a range of tax incentives, including an upfront income tax deduction, tax-free dividends, capital gains tax deferral, and so on.

Such individuals may be highly sophisticated professional investors — so-called “business angels” — or less sophisticated investors who prefer to invest in pooled funds managed independently by professional fund managers, as part of a long-term savings strategy. However, both types of investor contribute to the supply of equity finance to small businesses, thus filling the “equity gap” which afflicts SMEs in many economies — namely, the absence of risk capital at a level that is higher than “friends and family” can provide but that is too low to attract traditional venture capital. Further, private investors (directly or through a fund manager) tend to bring much-needed management support, governance, advice and mentoring to small businesses.

In SA it is estimated that there are 37000 individuals with more than R6m in investable assets. The private-equity industry, a vibrant part of the financial system with R43bn in assets under management at the end of 2004, has seen an increasing trend towards larger transactions, a typical feature of private equity across the world. Although a small number of firms, such as Business Partners, are actively investing in small businesses, there is an equity gap in SA (especially at investment size at R5m or less) as there is elsewhere in the world. The focus on increasing the supply of debt finance (for example, through the banks’ commitments under the financial sector charter) merely accentuates the need for equity finance at the SME level.

The question is this: can tax incentives help connect the potential supply of equity finance from private investors with the opportunities that exist in the SME sector, to the advantage of investors, SMEs and the economy?

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Source: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A204188

The gender mix of South African entrepreneurs have very little difference between them when it comes to numbers of new start-ups. Woman entrepreneurs have made a big leap forward in recent years. But can we compare the funding requirements?

According to a recent report by the Women’s Enterprise Forum, the average amount of money needed to start-up a high-growth business is R1,200,000.

However, what we find is that while male and female-owned businesses both need the same amount of money to get off the ground, where they get that money from differs greatly. Like it or not, the gender divide exists in financing business start-ups and growth as well as in large corporate environments.

Women most often fill the gap between what they need and what they have to finance their business from a bank loan, with over 60% choosing this route. Very few will go and seek outside investment via a business angel or a venture capital firm.

If you go along to an Angels Den meeting or a pitching event, as a woman you are likely to find that that you are outnumbered by about 10 to one. I know of a few meetings where women have turned up to pitch only to find that they are the lone female in the room.

So what's going on here? At the moment, only 2% of the venture capital funds available are invested in women-owned business. Is this because we’re not applying for the funds or because VCs don’t invest in women? I suspect it’s a bit of both.

The Women's Enterprise Forum's recent GROWE (Greater Return on Women's Enterprise) report stated that 17% of women don’t understand equity financing, compared to just 4% of men. This doesn’t surprise me at all as I don’t think there is enough going on in the women’s space around creating conversations about funding and financing, though there is certainly more than there used to be.

It’s great to see that there is more and more going on in this arena to encourage women to find out about investment via equity routes. Astia UK, for example, is a global not-for-profit organisation that has come over to the UK in the last year. There are also some female focused funds starting up, like the co-matching R120.5m Aspire fund, and the second Trapezia fund from Stargate Capital, which is currently seeking investors. Then there’s the female angel investment club, Addidi.

But there are also things women can do to support their own business growth and development:

1. Become more risk positive: women tend to be more wary when it comes to financial risk in a business context and while this makes them safe, it can also inhibit their growth potential

2. Build a strong team: find people, both internally and externally, who can help you to grow and take your business to the next level

3. Learn the language of finance: Become familiar with the options available and seek expert advice

4. Think BIG

If anyone is interested in finding out more about financing your business growth, a great resource is the South African Investors Network.

Julie Hall is the founder of Women Unlimited, a network for female entrepreneur