Introduction
To Funding For Women’s Business
According to SME South Africa, 47% of South African small business owners are women. That’s a 6% increase in the female to male entrepreneur ratio. We know that SMEs are a major driver of job creation, so on paper, the future certainly looks bright.
That’s until you factor in that 70% of new businesses fail within the first 18 months. It’s clear that access to funding for women’s business remains a big challenge.
According to one survey, 88% of small businesses are self-funded, have
never applied for funding and don’t actually know where to apply for funding.
Plus, most claim access to finance is their number one challenge.
So what can be done to support female business owners in South Africa? The answer seems remarkably simple. Funding. More specifically, it’s access to the right information that empowers female business owners to make informed financial decisions.
We’ve put together this handy guide to help you understand how
funding can be used to help your business grow.
Challenges
Affecting Female SMEs
There is nothing more satisfying than running your own business.
But being your own boss does come with its own challenges.
The main business challenges faced by SMEs are:
·
Access to finance and credit
·
Cash flow management
·
Marketing
·
Red-tape
·
Access to support
·
High startup failure rate
·
Access to markets
·
Skills shortage
Business funding exists to help deal with some of these challenges. As
an entrepreneur and business owner, you need to understand the unique
challenges that face your business and determine what kind of business funding can
help you overcome them.
Clearing
The Fog Around Business Finance
Financial literacy and easy access to information about business funding is key to solving many of the challenges facing your business. You need to know how to plan, budget, invest and have a working understanding of the financial health of your business.
It’s also important to know that applying for business finance
is not an indication that your
business is struggling. Most, if not all, businesses that have
been operating for some time need capital in order to scale.
Funding
For Women’s Business In South Africa
In the past, SMEs had to rely on banks to provide a range of financial services, but because of restrictions and tough requirements, actually walking away with the funding needed was difficult. Now there is a range of alternative lending options for SMEs, each with their own pros and cons.
Some forms of finance like bootstrapping, angel investors, venture capitalists, crowdfunding and accelerator programs are only applicable to new businesses and startups.
For existing businesses, funding options include secured and unsecured loans, bank finance and government grants. Funding intended for a specific purpose, such as a bridging loan or purchasing equipment, carry their own minimum requirements.
Alternative lenders have proven a popular
and more flexible option
for South African SMEs looking for easy
access to finance.
Business
Credit
Business credit can be a great tool for growing your business and it’s a lot more flexible than a small business loan.
A business credit facility works in the same way as a credit card, which can be a huge advantage for SMEs. It’s always there when you need it, which is great for peace of mind, and means you don’t have to withdraw from your personal funds when you need quick access to working capital.
And the biggest advantage – you only need to apply once.
Using
Your Funding
There is a common misconception that only new businesses require funding. The reality is that business funding can be applied for at any stage in a business’s lifespan and can be used to meet many different needs.
Examples of ways you can use your business funding include:
·
Expansion of your premises
·
Hiring additional staff
·
Equipment purchase
·
Marketing
·
Buying Inventory
· Managing Cash Flow
What you do with your business funding is ultimately up to you.
As a business owner, it’s your job to ensure you know exactly what you need
funding for and how to use it to achieve your business objectives,
whether it’s growth, purchasing seasonal inventory or buying the equipment
needed to scale.
Understanding
Debt
As a business owner, you need to understand how your money can work for you. This includes your business debt.
It’s important to understand that there is a difference between good debt and bad debt.
Bad debt does not influence your business growth. In fact, it does the opposite. Drawing on your credit card to cover day-to-day-expenses, luxury items or depreciating assets like a vehicle, counts as bad debt.
Good debt works for your business. Business funding that contributes to the growth of your business or ultimately increases your net worth can be considered good debt.