Want to start your own business? Don’t let financial constraints put you off realising entrepreneurial dreams. Getting a bank loan is one of the easiest ways to become your own boss and get your business off the ground.
Many of us dream about starting our own businesses, particularly if we have young children we want to spend more time with. But the reality is that financial responsibilities like house bonds, school fees, credit card debt and car payments often mean our dreams remain unrealised.
The good news is, there are simple ways to become a small business owner if you’re determined and get the right advice, says Sugendhree Reddy, director of banking products at Standard Bank.
Applying for a bank loan
Few people have the means to start their own business without a bank loan. But before lending you money, a bank will require collateral or security, which could include assets like your house or cash in the form of savings or investments. Most financial planners advise people to save 15% of their salary, but that can be difficult, so consider other ways of making money that’ll form part of your savings:
Re-examine your lifestyle and make some changes
Sell some unnecessary assets, such as second TV, extra furniture or appliances you might not need, or switch from driving a 4×4 to a smaller car. If you don’t like the idea of selling them on sites such as Gumtree or OLX, you could always consider exchanging goods for cash at a store such as Cash Converters or sign up to an auction such as SA Auction and sell your goods there.
How funding can help
Gwen Gower, 53, from Cape Town, applied for a bank loan when she left a sales director position to pursue a career in landscaping, with her fiancè, Tony. After resigning from her position, the opportunity to purchase a garden maintenance business arose, and Gwen sold her Mercedes to buy the business, and opened up EarthWorx.
After successfully running the landscaping business for a few years, the Cape experienced a massive drought and Gwen’s landscaping business took a hard knock. It was then that she decided to purchase a nursery down the road.
“I’d had my eye on this nursery for years, as I felt it would be a more sustainable business option. I’d often say to Tony, “Imagine if we could!” One day, I simply decided to stop in and ask the owner if he was interested in selling. He was, but we couldn’t afford the asking price. I got to work, finding a way to make it happen.
I looked at different funding methods and came across Business Partners Limited, who specialise in financing loans for small and medium businesses. I compiled a business plan, pitched it, and they granted me a loan of R1,5 million, which covered the costs of buying and renovating the nursery. We spent a month revamping, installing a new irrigation system and rearranging the displays. The stock that was sold to us was virtually unsellable, so we put it in a “sale” pile and knocked the prices down by 50%. In a few months we opened the doors of EarthWorx Garden World. Today, we host children’s parties at the nursery and we run a fabulous coffee shop that brings in a healthy profit.”
Gwen’s top tip:
If you’ve got a dream, pursue it – but first, do your research and make sure you understand the risks, especially when funds are tight.