Getting a loan for your business can be a huge challenge. It takes money to make money; however, most start-up business does not have enough money to start doing business. Here are some potential sources to get the start-up money for your business:
Getting a loan for your business from a bank
Banks require business owners to show repayment ability and have acceptable collateral to back up the loan. At the same time, they must have good business and personal credit and a reasonable owner investment in the project.
The business owner needs to show that her business idea has merit. Therefore, a well written and research business plan may help to convince a bank to loan money to start your business.
If you must sell an ownership stake to get your company off the ground, start by finding a respected industry executive who is willing to invest a reasonable amount and give your venture credibility with other investors. It is also an opportunity to work with a mentor and expand your business network.
Ordinary (equity) shares
Once your business has started and growing, you might want to raise more cash by issuing ordinary shares. The shares may be issued to existing shareholders or investors from outside of the company. Moreover, ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid.
Friends and family
If you’re lucky, friends and family members might be the most lenient investors. They don’t tend to make you pledge your house, and they might even agree to sell their interest in your company back to you for a nominal return.
The need for a business plan for getting a loan for your business
Lastly, a well written business plan will give investors and banks an idea of how viable your business idea or expansion plan is. Visit www.ebizplan.co.za for help in writing your business plan.