Smart ways to use your business funding

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budgetingThe South African Black Entrepreneurs Forum (SABEF) recently released the results of their first Kasi-to-Kasi workshop in an effort to better understand South Africa’s township entrepreneurs and small business owners. Among these enlightening results were the reasons given by the surveyed entrepreneurs as to why they need, or needed a loan in the past.

The leading reasons given are: startup capital at 47 %, equipment 32 %, followed by business expansion at 19 %.

SABEF National Executive Director Matsi Modise says entrepreneurs must be cautious and do their research before  taking out loans.

“Funding is borrowed money that will put you in debt even before you even open shop. Securing a market of clients for your business first, will essentially validate whether your product or service is needed by the market because you will see if the market will pay for your offering or not at your set price.”

Lee Bromfield, CEO of Core Lending at FNB Business agrees, saying they advise clients to use funding for key essentials. “The plan should be to ensure that there’s enough resources to start operating and generating profit”, he says.

Property rental, marketing and paying salaries are at the bottom of the results. Bromfield says they advise against using your loans to meet these financial obligations in the long-term. “Such a business model in unsustainable and there’s a high possibility that they might even fall behind on their loan repayments”.

Full survey results why entrepreneurs need or needed a loan in the past, question: 

Start-up capital – 47 %

Equipment – 32 %

Expanding my business – 19 %

Stock purchases- 3 %

Property rental- 3 %

Sustaining my business – 3 %

Marketing – 2 %

Paying salaries – 2 %

[PHOTO: Ray Muzyka, Flickr]

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