|
Brian's
Introduction
By
Brian Walsh (Founder & CEO of
Entrepreneur.co.za)
Many people see funding as their biggest
stumbling block on their journey of
entrepreneurship. In this section, we’ll look at
various options with regards to funding your
business.
In this introduction, I would like to share the
following tips with you.
Firstly, if you can possibly avoid it, don't
borrow money. Obviously, many business paths
require funding, such as buying a franchise or
buying an existing business. These have a lower
risk association because they are generally
turnkey operations, meaning that you will start
to earn money almost immediately. When you are
starting a business from scratch however, making
money is often much more difficult in practice
than in theory. When you owe money to a lender
it puts immense pressure on your business, and
it is often the lender who forces you to shut
down the business prematurely. If you can start
your business without borrowed money it can help
to prolong your opportunity to buy the time you
require to succeed.
Please remember that personal overdrafts and
credit cards are even more risky than borrowing
start-up capital. Avoid them at all costs.
If you need small amounts of start-up capital to
buy equipment or stock for instance, rather rely
on personal savings or friends and family. I
know this might sound strange, but 80 percent of
businesses in the United States are funded by
personal savings and friends and family, and it
is very similar here in South Africa. The risk
is lower this way, providing you keep the lender
fully updated with the progress of your
business.
If you do need to borrow larger sums of money,
then consider your options carefully. Don't just
go for the first institution that offers you
funding. There is often more than one option,
and you should look for the one with lower risk
associated with it, as well as preferable
payment terms and interest rates.
Lastly, most institutions frown on funding
personal salaries and expenses. Try to cover
these yourself as much as possible. Also, try
and reduce your monthly costs in every way
possible. Starting a business while you have
personal overdrafts and credit card debts is
unwise. Banks can become very sticky when it
comes to personal finance facilities, especially
when they don’t see regular income coming in.
Don't make a mistake here, because cutting down
in the short term is far less painful than
losing it all. |
