Difficult Truths That No One Tells Entrepreneurs About Getting Funded

Read If You Have Ever Been Rejected For Funding
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Read If You Have Ever Been Rejected For Funding

Any entrepreneur worth their salt will tell you that there is no easy answer to getting funded – whether it’s an angel investor, a VC firm or a business loan. While there is plenty of advice on the practical aspects of getting funding ready, there is a lot that is left unsaid.

We share all the harsh truths that you should prepare to face when searching for an investment.

1. Funders expect their money back – Andile Khumalo, founder of I Am An Entrepreneur

“You must be able to tell them how they are going to get their money back. Be realistic about it; don’t lie.

“It gives you credibility if you are realistic about how you will do things. Under promise and over deliver.” Read more

 2. The funding is not to be used carelessly  – Mags Ponnan, head of FNB Business Customer Value Propositions

​”SMEs have a tendency to waste their funds on unnecessary new assets such as laptops, cellular devices etc, but if you don’t need it, but rather want it, it will have to wait,” Ponnan says.

“Use what you already have and focus the funds on expenses that are absolutely essential to getting your business up and running. This is a classic example of ‘Do I want it?’ versus ‘Do I need it?” Read more 

Our motto is simple: No capital? No problem

3. Be prepared to answer A LOT of questions – Rick Ed, small business mentor, trainer and advisor and founder of Do Better Business

“How knowledgeable are you about the field you are operating in? How well connected are you to other players in the same sector? What does your business model look like? Is it realistic? Have you allowed for lean times? Do you have warm-body customers ‘signed up’? How will you scale the business when it’s ready to grow?” Read more

4. Sometimes not getting funded can work in your favour – Vusi Thembekwayo, speaker, entrepreneur and venture capitalist

“I am glad I had no money to start my first business. It was a strategy business and so I set-off to find work then I got the clients to pay upfront using a securitised instrument. Sounds complex but really it isn’t. Today, we start all our businesses like this. We finance off balance sheet until we can prove the business case. Today large companies don’t even ask for the security. They just want to partner with us and change the world because of our track record and results.”

“Our motto is simple: No capital? No problem.” Read more 

5. Your credit record will matter when you go knocking on funders’ doors – Gary Palmer, CEO Paragon Lending Solutions

“A good credit rating is worth its weight in gold. It is a sizeable measure of your worth in the eyes of lenders and will affect your ability to sign leases, negotiate new debt and secure finance for assets. Lenders obviously see the person who has a squeaky-clean past as first prize.” Read more

6.  Not being clear on the terms can hurt you – Alex Appleby, Head of Treasury and Risk at Retail Capital

“Business owners should firstly understand their capital and debt requirements relative to growth and budgetary forecasts, which in turn requires business owners to explore financing solutions to meet such requirements in the most cost effective manner.

“The financial product must ultimately meet the business’ needs in terms of price and tenor, however, this is dependent on the risk profile of the business or owner.

“Clearly understand the terms and conditions to avoid any hidden costs that may arise at a later date, including early repayment penalties etc.

“Ensure regular cash flow forecasting takes place to meet your debt requirements.” Read more 

7. It begins with you, the ENTREPRENEUR- Jeremy Lang, Regional General Manager of Business Partners

Funders want to see: Committed business owners, both financially and through their level of involvement in the business, business owners who understand their business from a technical perspective and have good levels of business acumen, business owners who run their business with integrity and transparency, business owners who clearly illustrate a passion for the business and industry and a business owner who understands their customer and market segment well.” Read more

8. Venture capital is not for everyone – Keet Van Zyl, VC and co-founder of VC firm, Knife Capital

“The funding an entrepreneur needs or takes on board depends on the life stage of the business and what the funding is needed for. In South Africa there are various forms of capital available to entrepreneurs whether debt, grants or equity. A VC brings more than just capital to the table, they also bring skills, experience and networks.

“When taking onboard a VC, you are also taking on a partner that is going to help grow the business but in doing so, will interrogate various aspects of your business. Not all entrepreneurs are ready for this.” Read more

You will have to account for how you spend your time and the money which simply by stating this externally becomes a powerful means of driving performance

9. There is no such thing as FREE money, and that’s a good thing – Lisa Illingworth, CEO of FutureProof recently applied for and received grant funding for enterprise development from FNB

“The majority of entrepreneurs don’t appreciate systems of accountability because they are beholden only to themselves. However, as Brendon Buchard states in his book on developing habits that sustain high performance, he cites deliberately setting up structures of accountability which dramatically improve delivery and performance.

“In having investors genuinely interested in growing your business alongside you, not by means of ‘the big stick’ approach but purposeful systems of accountability, you are able to pull a lever for growth that many entrepreneurs cannot access. You will have to account for how you spend your time and the money which simply by stating this externally becomes a powerful means of driving performance.”  Read more 

10. Sometimes the money never comes – Mushambi Mutuma, author of Tech Adjacent and entrepreneur

Mutuma’s LinkedIn post: “As entrepreneurs we really need to stop asking for money or expecting it. Firstly, it’s not actually what your business needs today. Funding with no consumer base, no brand trust, no plans for scale, is all pointless.

“Secondly, you probably won’t be able to give it back in the time period & multiple return an investor would want. It isn’t cheap. But most importantly, it’s not coming. Particularly for businesses without solid business plans, without real traction & a path of exit lined up.

“The number one investor in your business will always be a customer. They will have the highest ROI!

“Think instead how can you build a minimum viable product that can get you launched, some valuable insights, and some initial capital. Think instead how you can scale through adding more and more clients to your base.

“Funding isn’t going to save you. Sell your way to the funds you need.” Read more

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Lebohang Thulo
Lebohang Thulo
Lebohang Thulo is the editor of SME South Africa. She enjoys keeping up with the country’s exciting and fast developing entrepreneurship ecosystem. You can find her at @lelele3

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