CAPE TOWN - Start-ups face many challenges that stand in the way of it taking off. One of the main barrier being capital. We take a look at innovative ways for people to fund their new start-up, without the pain of money troubles.
Capital is necessary for any business, whether it be for product development, inventory or paying employees.
The traditional means of accessing capital is by means of a bank loan. However, this is not the only source of funding or always possible for start-ups who cannot secure a bank loan.
Crowdfunding is an innovative way for individuals to raise start-up capital. How it works is, individuals connect on a platform where everyone can chip in to raise money for a venture or project. Essentially, the process of raising small amounts of money by a large number of people is typically done on the internet.
Some of the crowdfunding platforms available for South Africans include StartMe and Thundafund.
Micro-loans or micro-credit is loans of a small amount that is borrowed to lenders who do not have a credit history, stable employment or collateral.
Izwe Loans and Makanda Finance are some of the companies who offer micro-loans.
Angel and venture capital investment
Angel or venture capital investors are usually wealthy individuals who provide capital for a start-up business. However, there is a catch involved. This may be in exchange for convertible debt or ownership equity.
There are several angel investors in South Africa. However, this remains to be proven legitimate.
One angel investor of mention is the South African Investment Network which claims to have a database of 901,708 registered members with 162,133 investors and 739,575 entrepreneurs.
Peer-to-peer lending, as the name suggests, involves a group of people or peers coming together to lend money to each other. This type of funding has been around for many years but it may not be the most secure way of borrowing money - unless there are legal provisions put in place.
- BUSINESS REPORT ONLINE