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Related Content Sizanani processes Khula-Business Partners Start-Up

To make a buck, you’ve got to spend a buck – but where do you get the bucks you need to start a business? We take a look at some options:

THE Industrial Development Corporation has a R1-billion fund for small-business development that targets rural areas, townships, BBBEE and, particularly, job creation.

The Competitive Financing Scheme for Development is split into six schemes which will only last until the end of this year (already 40% of the money has been allocated).

One of these schemes, the Pro-SME Jobs Scheme, targets labour-intensive start-up and expansion projects. Qualifying businesses must have turnover of less than R35-million and fewer than 200 employees. At least 10 jobs must be created at a cost of less than R150 000 each.

The minimum amount that will be loaned is R1-million.

You might think that the IDC isn’t for you; that it’s only for pretty big businesses but don’t be put off. According to Setlakalane Molepo, head of the IDC’s risk capital facility, start-up businesses are very welcome to apply for funding but they must have well researched, convincing business plans.

Interest rates are prime less 5% and the repayment period is typically 36 months.

For more information, contact the IDC on 0860 693 888.

THIS is a great website, especially for those who don’t know where to start. Fundman (which grew out of Acorn Technologies, the Western Capebased business and technology incubator) can link you to 57 funding providers and investors, depending on who you are, what you want to do and what sort of finance you’re looking for. The site was born out of the belief that if, as is claimed, there is lots of money looking for decent projects, most fundseekers see little evidence of this.

You need to register on fundman (although the site is free) and enter your details (it only takes a minute or two and you don’t need to enter any information you might consider secret). Then you search for potential finance.

From your search results you get pretty comprehensive information on the funders that might match your needs, their investment criteria as well as their contact details. Fundman can also put you in touch with expert advisers on various aspects of starting and running a business.

The site is particularly valuable if your business interests are technology-related but it’s an extremely useful resource regardless of your sector.

To register and explore potential sources of funding, go online to www.fundman.org.za

THIS fund (the pot is R150- million at the moment) targets new, start-up businesses, especially black-empowered and black-owned small businesses. Black women are a particular priority. The fund is interested in new businesses which will have an impact on community upliftment, notably in areas of underdevelopment.

Collateral is not a prerequisite for funding. Loan amounts vary between R150 000 and R3-million. A thorough business plan proving the project’s viability will be expected of loan applicants, as well as full details of those making the application. In addition to making available funds for start-up businesses, the Business Partners-Khula Start-Up Fund offers an expert mentoring service.

For details, phone Xolani Meva on (031) 240-7700

NOT sure if your bank will give you finance? Not sure how to approach them, what they’ll ask for? You might want to give Sizanani a try. Sizanani is a joint venture between the Banking Council of SA and the four main banks. For a R200 fee, a Sizanani consultant will evaluate your ‘bankability’ (your chances of getting finance). If they think you’re not bankable, they’ll give you a full report why not. (This might be disappointing but it can be a very useful exercise.)

If Sizanani does think you’re bankable, they’ll tell your bank so. Then, when your loan is approved, you must have monthly mentoring sessions with a Sizanani business adviser. This costs a few thousand rand (although it is subsidised) but these costs can be added to your loan.

Sizanani can be contacted on (011) 645-6700.

KWAZULU-Natal businessman Ernest Hlope will open his own vehicle-testing centre in Durban this month after securing a seven-year R1.1-million loan through Business Partners. Ernest says he identified the opportunity for a new vehicle-testing station in Umgeni Road three years ago. “I saw a big demand; there used to be a vehicle-testing station in the same area but it closed down.

”The 53-year-old says he investigated other vehicle-testing stations in the Durban area and found that “almost 100% of people in this business survive”. Ernest advises entrepreneurs wanting to apply for business loans to do their homework: “Give yourself a good deal of time to look at the feasibility of the business and to do research.”

He approached three other institutions for funding before getting a loan through Business Partners. “Perseverance is the mother of success,” Ernest says. The owner of a driver-training school, Ernest says the process of applying for a business loan took him nearly eight months.

He wrote a 20-page business plan, and also calculated the projected cash flow. This showed that he could expect a net monthly profit of R40 000 in the first year, rising to R55 000 a month in the second year.
The cash-flow projection for the third year is between R65 000 and R68 000 monthly net profit.

These projections were based on the centre (to be called Joe’s Vehicle Testing Station) testing about 500 Grade B vehicles - small vehicles and motorcycles - a month, or 40 vehicles a day.

The vehicle testing station will charge about R150 to test a vehicle and issue a roadworthy certificate.

Ernest used R520 000 of the R1.1-million loan to buy a 400m2 property for the business.

He used another R155 000 to buy the vehicle-testing equipment, including a brake-testing machine, spanners and wheel jacks.

His monthly loan repayments are R8 750 for the land and buildings and R2 800 for machinery and operating costs.

The business loan involved a once off, upfront “indulgence” fee of R13 000. The loan conditions also stipulate that Business Partners will take 4% of the gross monthly income of the new business.

Ernest says the business will employ eight permanent staff - three vehicle inspectors and five administrative staff -plus five security and cleaning staff. The cost of training the three vehicle inspectors was steep: R24 000.

Business Partners area manager Dumisani Zikalala says Ernest’s experience and contacts from running a driving school counted in his favour.

His business plan, and a Business Partners investigation, satisfied the organisation that Ernest’s business would be viable in the long term. – Dave Ball

In the next issue of It’s My Business we look at some more potential sources of start-up funding. However, remember that the best sort of finance is usually your own finance. Loans cost money. If you can, invest your own savings in your business.