Karl Westvig
Raising Capital

If you're a startup entrepreneur looking for funding to grow your business, there are a couple of steps you have to go through. Typically it's hard to get funding in terms of debt as a startup business, unless you have some sort of collateral to provide. My advice to a startup business: first, make sure you have a clean credit record in your personal name because most funders are going to go and look at your personal credit record.

The credit profiles for businesses are fairly limited in South Africa. They record your CIPC-type data - who the directors are and your company registration number. They'll typically do things like look at your bank profile which shows whether you have bounced debit orders.

As an entrepreneur, if you're looking for funding and looking for a credit provider to provide funding to you, there are two key things you have to look at. One is the cost of credits and second is the security you need to provide.

As an entrepreneur, if you're anticipating that there's a downturn coming or you're going to have a challenge funding your repayments on a facility, the most important thing is to stay in communication with a lender. If you try and avoid repayment, that's when you start getting the negative reactions, legal action against you, etc. Almost all lenders will entertain a discussion.

If you've built up a level of arrears with a current lender, once again, if you're talking to them, there are things they can do so they can restructure your debt. The most important thing to understand is your cashflow.

The business structure that you choose is important - if you set up a Pty Limited, it is a limited liability company and there's no liability on you individually.

The red flags seen ahead of time often relate to when entrepreneurs have multiple interests. Their focus is spread out. So they do not have a proper handle on their financials and their cashflow management.

You need to do proper cashflow management and planning - and not just for one month, but for three months, six months - understand your cycles. 

One of the biggest challenges we've seen is people grow too fast. They build a very successful business and then, to some extent, their ego gets the better of them. Don't expand too quickly, beware of the temptation to fund one area of your business out of another.

When you're looking at taking funding into a business, the most important thing is that there are two aspects. What's the opportunity am I chasing and what's the return in that opportunity? And, what's my cost of credit or my cost of funding?