CAPE TOWN - You might be thinking of starting your new year with a new business, but if you didn't save up for it, sure you will have to source funds from some where.
Venture capital and a bank loan can be a solution, considering the fact that both sources are awarded to a profit viable and well planned business.
As an entrepreneur thinking of sourcing financial assistance from a venture capitalist or a bank, you must know what get yourself into. Let's take a look at how venture capital and a bank loan works. This might be an eye-opener and clear the path for your conceived business idea.
According to the 2017 Southern African Venture Capital and Private Equity Association (SAVCA) Venture Capital Survey, the value of venture capital investments the value of investments increased by 134% in 2016.
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SAVCA CEO, Tanya van Lill says, "Early stage capital is essential for investee company growth, but value adds additional valuable contributors to long-term success: strategic and operational expertise, sound corporate governance, expanded business networks and improved business processes".
This shows that venture capital is not only about finance, but business knowledge, mentorship, human resources and leadership to run business forward.
In the South African business context the venture capital company must be a resident; the sole object of the company must be the management of investments in qualifying companies, its tax affairs must be in order; and it must be licensed in terms of the Financial Advisory and Intermediary Services Act, according to South African Revenue Services' website.
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So venture capital rekindles a fire that's already alight while reaping their returns bit by bit, not forgetting to ensure the success and sustainability of the entrepreneur or business owner in question.
Van Lill added that the that businesses included in their survey demonstrated innovativeness and and are well managed. "In partnership with reputable venture capital players – are well placed for sustainable growth".
When we talk business loan, the commercial banks require that your business has a certain annual turnover in order to qualify for a loan to finance your capital expenditures.
Aspiring business owners with only a documented business plan are basically excluded by this requirement.
For the banks, if the applicant qualifies and the loan is approved, the loan amount is deposited into the business account and debit order installments are deducted from the business account on agreed terms and conditions with the bank.
Banks are not interested in business decision making and profit sharing like venture capitalists, their interest lies much on generating their interest via loan repayments.
According to BusinessBlog, a bank can be advantages since it is accessible and convenient and can be used regularly for depositing savings or withdrawing them, tightening your relationship with it in the making.
A responsible credit behaviour with your bank also increases chances for prospective business financial assistance that you may require.
As a business owner, it is highy important to be aware of what you commit to, when on the lookout for business funding.