Content provided by a guest contributor.
There are several ways that you can raise the funds that will let you buy a business and become your own boss. Some of these examples will be less obvious than others. It is important that you find the option that will work best for you.
Carefully evaluate each one alongside your current situation as well as your future plans. Research and talk to as many entrepreneurs and professionals as possible so that you can make an informed and practical decision.
Remember that you might need to be a little more creative than you think when it comes to raising finance. Ultimately though, if you have made the decision that you know is right for you, the process should be far less stressful.
So, whether you are looking to finance a retail business or a farm, read on!
Your own finances
The easiest way to raise finance for your business is to use your own money. If you can fund your business venture yourself, you are accountable only to you. You could include your savings, your home equity, or other available assets.
Most likely, you will not have the funds to finance the entire purchase with your own funds. You will probably, however, need to use at least some of your own money in the purchase.
The other more obvious way to raise finance to buy a business is through a bank loan. This can, however, be quite a difficult task. Your business plan will have to be extremely thorough and fool proof and you will need to prove that you have experience that can guarantee that you will be able to make a success of your new venture.
To get a bank loan, most likely you will need to have proof of substantial assets that can be used as collateral as well as a good credit history.
There are specific banks in South Africa that deal with providing loans to small businesses and these are the ones that you should approach. For example, Nedbank has Small Business Services and Investec has a Business Finances service. Ask around at a few of the reputable banks to see what kind of services they offer for small business financing.
As another option, the seller could provide financing for you. Through this process, the seller provides you with a loan to purchase a business and then you pay it back over time usually using the profits from the business.
This option is often popular with business buyers because the seller will then have a vested interest in the success of the business. This type of financing is also easier to get than many other types.
The South African government has many initiatives that aim to help small businesses and aspiring entrepreneurs. There are several government agencies through which you can find a grant for funding for your business.
The Department of Trade and Industry is a good place to start. There are opportunities for businesses that qualify in a wide range of sectors. There are also funds available for B-BEEE and previously disadvantaged people through the National Empowerment Fund.
You should also check the opportunities that available in the specific province in which you are hoping to set up your business.
This is a much newer way to raise financing for your business. Although it has become quite prevalent internationally, it is only just starting to take hold in South Africa.
However, if you are confident in your idea and feel like others will be too, this might be an option you. You will usually need to present your plans to an online audience and, if the idea appeals to them, they will pledge money towards your project and become investors in your business.
This type of financing, however, is usually used for start-ups that are looking to fund an idea or a business looking to expand as these are things that will grab the attention of investors. If you are hoping to buy a business you might need to be creative in how you present your idea or, you could aim to raise only a small amount of money through crowd funding and get the rest elsewhere.
Family and friends
If you’re looking to finance buying a new business, don’t forget to turn to your family and friends. This is one of the more common ways that people find money for their new ventures.
If you are going to go this route, though, you will need to tackle it in the most professional way possible. Make sure that you have a clear business plan that you can show them with a detailed strategy of how you intend to pay them their money back.
Money can easily come between people and destroy relationships so choose this option with care.
The content in this article was provided by Bruce Hakutizwi, USA and International Accounts Director for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses.