“When looking for funding, don’t just look for cash. Look for the right people” (American fashion entrepreneur, Jodie Fox)
According to South African Reserve Bank data, the low level of small business financing appears to be emanating from the demand side as “the vast majority of SMEs indicate that they do not borrow from financial institutions, particularly banks”.
Statistics SA’s Annual Financial Statistics (AFS) recorded that “Industries in the South African formal business sector, and included in the AFS survey, generated R10,5 trillion in total turnover in the 2019 financial year. … A breakdown of turnover by business size shows that small businesses were responsible for generating R2,3 trillion (or 22%) of the R10,5 trillion.”
There are however alternative funding options for small businesses in general, rather than the conventional method of going to the banks.
These are available to small businesses with the objective of meeting certain quotas, including gender, race, regional and industrial transformation.
Examples of agency funding programmes include:
Bootstrapping, also known as financial bootstrapping, describes a position in which an entrepreneur starts a company with little capital, relying on own funds rather than outside investments to build the business. Bootstrap financing techniques are often favoured by smaller businesses.
Various crowd funding platforms are available online in South Africa, with the general touch points being a funding goal project description, audio visual presentation, rewards structures for backers, “jump starters” profiles and project deadlines.
The size of the crowdfunding market in South Africa is yet to be determined, even though regulators are said to still be trying to get a full understanding of the increasingly popular trend.
Although crowd funding is not specifically regulated in South Africa, certain activities may fall under various financial services regulatory provisions and legislation.
Crowd funding is also popular with crypto-assets managers, deriving from their common nature of surviving in a digital habitat.
Crowd funding classes are:
Make space for a partner
Getting a business partner comes with both advantages and disadvantages and should not be embarked on without professional advice.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.