Ronel Jooste FinanciallyFiTLife Business Funding

Ronel Jooste FinanciallyFiTLife Business Funding

Types of funding for businesses

Lack of funding is one of the reasons many businesses fail. Lack of funding also discourages many potential entrepreneurs from starting a business. These are some sources to acquire funding for your business.

  • Personal Savings
  • Loans from family, friends or close associates
  • Bank loans or credit cards
  • Loans from government organisations focussing on assisting small businesses
  • Get a partner for your business
  • Angel funding (wealthy individuals who will provide funding in exchange for an equity share in the business)
  • Venture capital (provide significant amounts of funding in exchange for an equity share in the business, but will only consider businesses who can ensure a good return on their investment)

Revenue and Cash flow

Whenever businesses apply for credit, ensure that your revenue and cash flow can cover the instalment. Also budget for a potential interest rate increase to avoid ending up in financial difficulty when you cannot afford the increased instalment.

Short-term debt versus Long-term debt

Short-term debt refers to debt which is due within one year and will reflect as current liabilities on a balance sheet. Short-term debt is typically used for short-term funding needs i.e. buying new computers or when there is a timing delay on your cash inflows. Short-term debt includes credit cards and overdrafts. Long-term debt refers to financing or leasing agreements which will be payable over the longer term i.e. new premises or expansion projects. Long-term funding will reflect as non-current liabilities on a balance sheet.

Negotiate better credit terms

Negotiating better credit terms i.e. lower interest rates and / or longer repayment periods with your creditors can have a significant positive impact on your cash flow. Budget for your creditor payments to ensure you can pay your creditors when it is due and you don’t pay late. Maintaining a good credit record with your creditors will count in your favour when negotiating for better terms.

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