In the second of 10 webinars in the Survive and thrive series, brought to you by the Allan Gray Umbrella Retirement Fund, we delve into financing your business beyond relief funding and explore alternative ways to generate funding for your enterprise. Watch the ‘Financing your business beyond relief funding’ webinar recording below.
Standard Bank’s head of Commercial Banking, Craig Polkinghorne, Transaction Capital chief executive officer, David Hurwitz, and Hlengiwe Makhathini, the divisional executive of Venture Capital & Corporate Finance at the National Empowerment Fund, shared a number of valuable insights based on their vast experience with business owners. Here are the key take-outs.
Access to capital and markets is key
When you consider the capital mix in your business, Polkinghorne says you need to look at three components: your equity, your liquidity, and your people. These components are the lifeblood of your business and should be prioritised.
Hurwitz urges small businesses to have more than one source of capital to manage concentration risk: “Have a diversified shareholder base. If you can’t because it is your own business, then try and have more than one bank in your business. Different banks look at different things at different times.” Hurwitz also encourages entrepreneurs to explore their foreign funding opportunities, where applicable. If your business has a social impact that aligns with a sustainable commercial model, you may be able to source funding from international development finance institutions (DFIs).
To generate revenue, entrepreneurs need to be able to access markets says Polkinghorne: “If you don’t have a market, you really can’t trade.” The various stages of the lockdown have prevented many business owners from accessing markets.
Banks want to keep you in business
During periods characterised by financial pressure, business owners often develop an adversarial relationship with their funders. This should not be the case.
Polkinghorne argues that entrepreneurs should view their funders as partners: “The banking industry is not in the business of putting people out of business. That’s not what they are there for.”
Hurwitz notes that debt collection has become critical for consumer-facing businesses as consumers face significant financial pressure. Bolstering your partnerships and support in this area could improve your liquidity.
By proactively leveraging these partnerships and having open conversations with your funders, you can come up with solutions that address the unique challenges facing your business.
Build a solid track record
Funders tend to back entrepreneurs who display resilience and tenacity despite a lack of resources.
Makhathini says that business owners need to demonstrate that they are taking action and generating new ideas to make sure that their businesses are sustainable beyond the current crisis. “You need to show agility and flexibility as an entrepreneur. You need to show creativity. What are the opportunities that you are picking up in the market?”
Funding partners are less likely to provide additional funding to your business if you are merely asking for money to keep you afloat while you wait it out.
Non-financial support has real value
Business owners should also leverage the non-financial support that your funding partners can provide in the form of business coaching and mentoring programmes. These partners can give you the perspective and strategic support you need to change the trajectory of your business.