tradek.co.za

FUNDING FOR YOUR BUSINESS
1.    New businesses face the problem when starting out of raising sufficient funds and will also face difficulties getting a bank loan. One alternative to consider is venture capital which offers capital in exchange for equity in a company. This type of funding is ideal for new businesses since it focuses mainly on the future
prospects of a company rather than past performance as a primary criteria – as used by the banks.
2.    Asset based lending has become increasingly popular as a means of funding growth and providing working capital. This is where a lender accepts the assets of a company as collateral in exchange for a loan. Most of these loans are financed against accounts receivable and sometimes even against inventory. Another type is factoring which involves the purchasing of a company’s accounts.
3.    Long term funding is a loan where the interest and part of the principal are paid back in equal instalments over the life of the loan.  These are usually given by commercial banks government sponsored loan programs or small business investment companies.
4.    A line of credit is designed to provide short term funds to a company in order to maintain a positive cash flow. As funds are generated later, the loan is repaid. One advantage of a line of credit is that the no interest is accrued until the funds are withdrawn, but the line is immediately available for the company’s cash flow
needs.
5.    A letter of credit is a guarantee from a bank to a service provider that will be honoured by the bank if the borrower fails to pay. Letters of credit can be useful when dealing with new vendors who may not be assured of a company’s credit worthiness.