The economic climate in South Africa demands that citizens find creative and innovative ways to make a living.
Entrepreneurial enterprises have long been touted as one of the most effective ways for out-of-work individuals to overcome the scourge of unemployment affecting the country, particularly its youth.
According to Charlotte Danby from management software company Sage, small business funding does not need a bank. She advises young entrepreneurs in search of finance to think differently and to keep on trying.
Danby suggests several alternative strategies that would-be entrepreneurs can use to secure small business funding.
“With grit, determination and some creative out-of-the-box thinking, you can fund your start-up or side hustle with a range of alternative small business finance options.”
Here are her four suggestions:
1. Crowdfunding
Crowdfunding is made possible by digital communities of like-minded people. Essentially, successful crowdfunding gives an entrepreneur small amounts of start-up funding from many interested individuals.
Some crowdfunding sites are donation-based, meaning people donate money simply because they like your business idea and want to help fund it. There’s no expectation of receiving anything in return.
Other sites operate as equity platforms; investors will ask for shares in your business in return for their investments, making them shareholders. When your business begins to turn a profit, you’ll have to pay them dividends.
Of course, the success of any crowdfunding campaign depends on how well you pitch and promote your business idea online. Make sure you create a compelling page describing your business and its objectives. Also, be clear about the amount of money you hope to receive and how you plan to use it.
There are loads of crowdfunding websites available, but a few of South Africa’s most popular ones include Uprise.Africa, The People’s Fund and Jumpstarter.
2. Microfinance
Microfinance, also known as microcredit, is a type of banking service. It provides low income and unemployed people with small business finance in the form of small, safe and ethically-managed loans.
Microfinance is a more inclusive form of traditional bank loan. It acknowledges the growing number of necessity-driven entrepreneurs who cannot access standard financial services or support. That said, if you do consider this route for your business, remember that you are still taking out a loan and that you will need to pay it back with interest.
3. Negotiate an advance from customers
This is an interesting approach that can be negotiated in a few different ways.
Of course, having even one customer implies that your start-up is operating to some degree. So, let’s say that you’ve already enjoyed some repeat business from a few customers, which means they like what you have to offer. If you’ve used the sales to build some personal engagement with these customers and feel like there’s a positive rapport, send them an email asking them for an advance to help you take the business further.
You should offer your customers something in return for any advance, such as a percentage discount on future transactions, free shipping or shares in the business.
It’s best not to do this on your own, though; ask someone to check your email before you send it – such as a trusted ex-teacher, a previous colleague or even your old boss.
4. Pitch your business at competitions
This may sound a little scary, but let’s be honest, if you’re an emerging entrepreneur, then you’re already braver than most!
Entering a business start-up competition is a great way to pitch your idea to judges and promote it to a network of potential investors. Not only could you secure some, if not all, of the small business funding you need, but you’ll also get important business feedback from people who’ve been there and done it. What’s more, you’ll gain access to a network of fellow entrepreneurs, possible mentors, and, hopefully, keen investors.
These are just four alternative start-up funding suggestions that could be what you need to get your business off the ground and flying.
It’s important to remember that success doesn’t happen overnight. It takes time, perseverance and hard work. A crucial part of the journey is building relationships with people who could play an integral role in your business’s growth – they might not invest in your business or buy from you immediately, but one connection leads to another.
The key is for entrepreneurs to put themselves out there and open themselves up to trying new ways to secure the funding they need. A clear vision of what you are trying to achieve is paramount if you are going to convince potential investors to believe in your ideas as much as you do.
IOL Business