Monday, September 24, 2012

Six Top Resources for Social Funding

There are many popular platforms out there now from peer to peer lending to crowdfunded donation seeking or small business funding which can be found around the globe. We've created a list of several that vary in the model they use, the location the funds are available, or the types of projects that may be eligible. This is a small drop in a large bucket of fund raising options available. There are many more entering into the foray as the success of this grows stronger and stronger. Many countries are now in a prime position to join in and grant access to funds never before available to citizens until now. A brief look at the various possibilities show exactly how much promise this can hold for the talents and skills awaiting their ability to launch:

1. – funds creative projects in thirteen categories ranging in everything from indie films, video games, journalism, food, theater, and much more via donations. In this platform do not obtain any portion of the ownership but instead they receive "rewards" of products, benefits, or experiences. The project creator sets a funding goal and a deadline to meet that goal. If the goal is met successfully, all donors are charged the amount pledged by credit card charge from Amazon Payments. If not, no one is charged and it closes without any funding. Kickstarter's fee is 5% of the funds raised and Amazon collects an additional 3-5%. Kickstarter does permanently archive all projects and media which can never be removed, but it does not claim any ownership of the projects whatsoever.

2. – Considers itself America's first peer to peer lending marketplace. It's purpose is to connect people wishing to invest with those seeking investor lent funds. A borrower first lists their loan request anywhere between $2,000 to $25,000. Lenders invest can then select listings they want to invest in and it can be as little as $25. They base their selections on the available information on each listing such as credit rating, history, endorsements or affiliations that would provide recommendations and establish credibility. As the facilitator Prosper Loans Marketplace, Ltd. Services these loans for both the lender and borrower. Propser sets the loan rate based on their own criteria that is individual for each listing. This rate also influences the desirability for investors to consider for each listing. All transactions are in US dollars; lenders and borrowers must be US residents. This business model falls within the parameters of the SEC laws now after having been targeted for participating in the sale of securities. Because of the pioneering nature of other upcoming businesses also using this model's structure and the rise in popularity at the time, the SEC now has policy that mandates all peer to peer lending sales transaction companies to register with them for the sales of securities.

3.      Zopa – Another peer to peer modeled lending service based in the UK. Primarily operating in the UK, they have begun to spread operations with modifications to fit within the laws in Italy, Japan. It's premise is likely the original and very similar to Borrowers can seek funds in any amount between £1,000 to £15,000 over a term of for 2 to 5 years. They have categories of A*, A, B, C, or Young. The lettered categories are based primarily on credit score through Equifax, Experian, and/or Call Credit, and designated for borrowers aged 26 or up. The Young category applies to borrowers aged from 20 to 25. Each category has a rate calculator according to which category the borrower would fall into.

4.      Grow VC – A literal and first of global crowdfunding platforms. Being called a Virtual Silicon Valley platform designed for early phase funding for start-ups. Their entire reason for creating this access was to never have the next big thing not happen simply because of lack of funds to get going. They already have operations in almost all major markets, North America, South America, Europe, Africa, India, and China with main offices in the UK, New York, and Hong Kong they plan to continue to expand and emphasize cross-border collaborations by creating a community of entrepreneurs and investors.

5. – A service for creating pledge drives and campaigns to raise and distribute funds. Campaigns for funds are provided a widget for their site and social media to hit as much networked sources up. They are also given a Chipin Page to promote the details of their ChipIn. Contributions are sent via PayPal and sent directly to the person's PayPal account.

6. – an international crowdfunding site headquartered in San Francisco, California. As of 2011, it has hosted over 45,000 funding campaigns in areas such as music, charity, small business and film. The site was launched at the 2008 Sundance Film Festival. The creator, Slava Rubin was quoted as having announced the site is “all about allowing anybody to raise money for any idea.” The site levies a 4% fee for successful campaigns. For campaigns that fail to raise their target amount, users have the option of either refunding all money to their contributors at no charge or keeping all money raised but with a 9% fee. Users create their own media for their fund raising efforts most often on social media sites. They consider themselves the world's largest global funding platform.

As you can see the options are nearly unlimited and yet this method of business funding is spreading every day! Don't let your talent or innovation fall by the wayside. Seek your own path to success, because there is now access on a global level for any kind of endeavor.

Saturday, July 28, 2012

Revolutionary watch crowdfunded in weeks after years in business finance wilderness

After spending years trying to raise venture capital for his innovative new watch project,  Eric Migicovsky  finally tried crowdfunding as a last resort. One of his friends recommended it after his own success in raising funding. He read up on the best approach to crowdfunding, decided on a list of goal amounts and related rewards and posted his project on Kickstarter, arguably the most successful crowdfunding platform to date. The result? Pebble Watch got $500,000 in funding after one day on

  Speaking in Boston at the World Congress Leadership Summit on Telemedicine at the Colonnade Hotel today, Eric Migicovsky, Founder and Lead Designer at Pebble Technology, described years of fruitlessly seeking enough investment capital to support the launch of his team’s invention, a customizable watch, only to be completely funded within weeks through crowdsourcing on In fact, on the first day on Kickstarter, his team made five times their original goal of $100,000.

The Pebble Watch is programmable, customizable, and integrates with iPhone and Android. This makes it possible to connect the watch with health apps designed to support patients with chronic diseases, such as diabetes. Patients could program in alerts to take medication, as well as use sports and fitness apps to help them keep healthy and even lose weight.

“Apps can be prescribed to patients,” explained David Barnes, Strategic Advisor at Happtique. His company has designed a proprietary method for mobile devices, such as the Pebble Watch, to transmit health care data securely. Happtique is also developing an app certification program “Blue Ribbon Panel” that would make sure health applications using mobile devices such as the Pebble Watch meet standards such as operating reliably, having valid health information, and safeguarding data.

Does the Pebble Watch’s success on Kickstarter after its failure to obtain traditional investment, show that crowdfunding is the  new sollution for breaktrough concepts and entrepreneurial support, asks Candace Klein.

One of the key reasons for the success of crowdfunding is that smaller projects of $25,000 to $50,000 could easily be funded by crowdsourcing but would be too small for venture capitalists to consider, she points out. In addition, if a larger effort can demonstrate that it can raise some portion of its funds from crowdsourcing, investors will be encouraged that the project has popular appeal.

Following the success of the websites such as, and it will be interesting to see the level of sucess South Africa's own  will manager to achieve.

Monday, February 20, 2012

Finding Finance as a Solo Entrepreneur

Finding finance as a small business or a lone entrepreneur can be very challenging to say the least. Although most governments today realise that the success of their economies can be greatly enhanced by supporting small businesses more and providing a good breeding ground for entrepreneurs with viable business plans to start up, few of them will be willing to take on the banks with regulation to force more small business finance and loans.

But have you wondered why there are so many claims that the banks have shut up shop? Surely they can only make money by lending money. It simply makes no sense at all for them to stop lending completely.

The evidence is that they are still lending – at around R500 million each month in new term loans to businesses turning over less than R1 million. In total, the banks have about R37 billion of term loans outstanding to small businesses and around R7 billion of overdraft lending.

Of course figures can hide more than they tell you. Some numbers seem to say that, on average, small businesses are borrowing less and saving more, which could support the banks’ argument: that they cannot lend because small businesses do not want to borrow. But the answer must be more complicated than that or small firms would not be complaining.

To me, it seems that there are businesses that:
 • • Have enough cash to save some away and don’t need to borrow.
 • • Want to borrow and do get loans from the banks.
 • • Could borrow to invest, but choose not to just now.
 • • Might borrow but think they will be turned down.
 • • Want to borrow and don’t get a loan from their bank.
 It’s the last group that potentially causes the most concern. The most pressing cases are always when a business is on the brink. It may need to pay wages or a key supplier but a customer has not paid or, worse, has gone bust or gone elsewhere. So, even if the business is profitable, the cash isn’t there to pay the bills. The obvious first call is to the bank – can I have or extend an overdraft?
Well, while the bank will want to lend, it won’t want to lose money, so it needs to be satisfied that the business can repay the loan or pay down an overdraft.

It needs to be sure that there will be enough cash not only to repay, but also to provide a buffer in case other customers go down or disappear. And with the current state of the economy, the banks have probably been looking for bigger buffers.

Even if you show you can repay, the bank will often need some more comfort. It still needs to get its money back if the repayments aren’t made, so it asks for security as well.

That can make it very difficult to borrow. Even if you are profitable, think you can afford to repay, and have some assets, the bank might still say NO! Why? Well remember that the money being lent is often the savings of other people and other businesses: so it can’t afford to take risks with that.
But are the banks being too risk averse? The truth is that nobody knows the answer to that question because nobody can know with any certainty how quickly the economy will be back to sustainable growth and how rapid that growth will be. Only when confidence returns will banks feel able to relax their lending criteria. In other words, when the sun comes out!

So what can be done? If the banks don’t meet the targets government has set, growth will be slower and less certain, creating a vicious circle.

But it’s not just about targets; there is practical help for lending as well. Where a bank would lend but can’t because of a lack of security, it can call on the Government’s Enterprise Finance Guarantee (EFG). The scheme can substitute for a lack of, or even absence of security, and it can be used for new borrowing, restructuring existing borrowing, overdraft extensions or invoice finance facilities. It helps the bank to say Yes where otherwise it would say No.

There is plenty of capacity available for banks to use it and as much support as they need to help them do so. There is no reason for them not to. They’ve already used it to help over 15,000 businesses borrow more than R1.5 billion.

Not only does the EFG help businesses who would otherwise be turned down, it can also encourage those that think they may be turned down to make an approach to their bank. That can encourage investment and help to get the wheels turning again. Just what we need.

One final interesting statistic which questions the mood of gloom. Tucked away in the latest insolvency statistics is the news that the liquidation rate of companies in the year to end-June was 0.7 per cent.

That’s the proportion of active companies that went into liquidation in the year. That figure is much lower than the peak of 2.7 per cent in 1993 and lower than the 25 year average of 1.3 per cent. So perhaps things aren’t so bad in the real economy?

As a lone entrepreneur part of the challnge of starting up succesfully will surely t gain access to the business finance you need. In South Africa today companies like the IDC and SEDA is doing their bit to ensure that previously disadvantaged have the business finance support they need. Companies like Business Plan Whiz will provide you with direct access to investors when you are creating your business plan and Investors Network will introduce you to business investors at regular networking events for strart-ups. But the facs is that much more still needs to be done in order to esnure that this most crucial

Cash Flow and Solo Entrepreneurs

Cash is key for any solo-entrepreneur. Without the financial backing of a business partner or investor behind you, it will be crucial to you and your business that that the financial planning part of your business plan and the effective follow up and adjust process in relation to this is done effectively.

Without adequate cash, you can’t pay your bills and you can’t make plans for your business. what is cash flow planning? Cash flow planning is projecting your future cash inflows from sales, services, and loans, and comparing them to your future cash needs (suppliers, salaries/wages, loan payments, taxes, etc.). The difference between the two is your net cash flow.

Why is cash flow planning so important? Cash flow planning can help you identify problems down the road, and fix them before they occur. It can also help you make decisions such as should I attend that conference wanted to attend, should I buy the new computer I've been wanting, or do I need to work extra hard this month to avoid a cash deficiency next month?

The first step in planning your cash flow is knowing where you spend your money! Solo entrepreneurs need to have a good grip on both their personal and business spending, as most solo entrepreneurs rely on their business income to meet personal finance goals (i.e., pay the bills!). So, you should track both your personal and your business spending, although I recommend that you keep them separate (that’s a topic all by itself).

the best way to track your spending? You can use pen & paper, spreadsheets or a software program. The best method for you is the method that you will actually use on a regular basis.
You should project your spending for at least the next 12 months so that you include annual and other periodic expenses. If you are experiencing a cash flow crisis, you should track & project your cash flow on a weekly basis, instead of monthly.

If you are an existing business, you can project your cash flow for the next year by reviewing your expenses for last year. If you are a new business, you will need to estimate your start up costs in addition to regular operating expenses.

Start up costs include inventory, legal expenses, advertising, licenses & permits, supplies, and many more costs that you may not have thought of. To research startup costs you should contact your local Small Business Development Center, contact a SCORE counselor, join groups of similar business owners, and read as many books or articles you can find on the subject.
To improve your cash flow, you should:

1. Complete the first 3 steps. You have to understand cash flow planning, track your cash flow, and project your future spending needs before you can improve your cash flow.

2. Create best and worst case scenarios and create appropriate responses to both scenarios. For example, if your best case scenario is to increase sales by 50%, how will you use the profits? Will you put the profits back into the company by investing in new equipment, training, etc.? If your worst case scenario is a drop in sales by 50%, how will you continue to cover your monthly expenses? By planning for the best and worst case scenarios, you ll be ready for any situation.

3. When estimating your future income, realize that some people will pay late, and account for that fact in your projection.

4. Charge what you are worth. Many businesses, especially service professionals, under-charge when they are first starting out. This is a great way to go out of business. Make sure you are charging what you are worth, and remember you are in business to make money, not to give your expertise away for free.

5. Watch your business spending. Focus on the value the item brings to your business, and avoid lavish spending (i.e., do you really need the fastest, newest computer available?).

6. Don?t hire until necessary. Consider using virtual assistants or temporary employees before hiring permanent employees. 7. Give incentives for early payment for products and services. On the flip side, chase down invoices the minute they?re late. Charge interest or late fees to encourage timely payments.

8. Update your projection regularly. Your cash flow plan will change frequently as your business grows. You may want to update it weekly when you first get started, then switch to monthly once you've got a good handle on your cash. Remember - whether you are a new or growing business, your cash flow projection can make the difference between success and failure.

Make sure you are being realistic about the cash flow of your venture in your business plan. Its easy to over estimate sales and under estimate costs and the time it may take for your business to start generating sales.

Thursday, March 24, 2011

FNB opens doors once again to entrepreneurs

Great news for business finance seekers with viable business plans, is that in recent news stories it seems evident that First National Bank (FNB) is bent on lending money to small businesses even though so many entrepreneurs are so reluctant to request funding from financial institutions.

After a few years of tight belts from the banks it seems clear that they are once again saying to small businesses - hey, we are open for business!

SA’s president, Jacob Zuma and Finance Minister Pravin Gordhan have, in recent speeches, alluded to the ability of small businesses to create jobs in 2011, Zuma’s year of employment growth.

The CEOs of FNB Commercial, who run relationship banking segments which focus on providing lending to small businesses, yesterday (Thursday) said they had gained an edge over their competitors over the last year, by making strong strategic decisions. This had included taking equity stakes in their clients and not changing their criteria to extend loans to those businesses.

"We work in a very competitive space but I think our edge has come through us coping with the recession better than our peers did. We have a widely balanced portfolio and did not expose ourselves to assets that were overly risky at the time such as gold course estates," CEO of FNB Commercial’s Premium Business Banking segment, Michael Vacy-Lyle said.

This segment provides funding and guidance to companies with an annual turnover in excess of R10m.

The group also has a segment for companies which record a turnover of zero to R10m each year, called Business Banking.

But businesses are reluctant to take out loans, CEO of the Business Banking segment, Kirsty Davis said.

"We are working in a depressed market with many individuals being highly indebted," she said.

Still, FNB Commercial’s overall commercial advances grew 8% year-on-year from July last year to date, while the industry it operates in saw virtually no growth, the group’s overall in that period CEO Willie Miller said.

The question here I'm sure many of you will already be asking is how much of this is PR and how much of it will come through to you as a business owner going in to see your bank manager for the 3rd time, requesting that more funds will be made available for you to pay your suppliers while clients are slow to pay. I guess time will tell and we will quickly see of FNB's word really does translate to more money being available to you the entrepreneur.

Saturday, February 19, 2011

a Business Plan for Business finance

For any entrepreneur, whether you are starting or growing your business, creating o a business plan is a key process, helping you to outline what will be done with which resources and ideally a justification of the demand, not to forget understanding the competition.

For many business owners, the business plan has the key purpose is to ensure finance for the business. Both business angels, venture capital firms and banks of course will be very keen to see a business plan before they consider whether to get to know you a bit better and if all goes well, start the negotiations regarding he terms of your way forward.

This guide explains what you should include in your business plan and how you should present it to potential investors, shareholders and your bank.

The essential elements of a business plan
Potential investors and lenders will examine your business plan closely to determine whether to risk their money.

There is no standard format but most plans include:
An executive summary highlighting the main points - to catch people's attention.

Details of key personnel with an organisational chart showing individual responsibilities.

Market research - details of competitors and how your product or service fits into the market - eg who your potential customers are and why you think they will buy your product or service.

Your marketing plan - how you are going to get your product or service in front of potential customers, together with any assumptions made when setting your targets.

Financial information - eg key ratios. These can be used to compare your business' performance against industry benchmarks. It's also a good idea to give details of any major expenditure you have made on long-term assets and explain the reasons behind any changes in working capital items, such as stock, debtors and creditors. Remember to include balance sheet and profit and loss account details. Many lenders ask for three years' financial information. If this is not available, supply details about trading to date.

When seeking funding, include:
A cashflow forecast indicating the amount of funding you need and why. For a start-up, include estimates of how much finance you will need for two to three years or until you start to make a profit. Indicate contingency funds that might be needed for rough patches. This is usually between 10 and 20 per cent of the total funding requirement.

Financial forecasts for a three- to five-year period. Try to present this information in the same way as historical financial information, so that straightforward comparisons can be made.

How a loan will be repaid, how investors can get their money back, and when.

Tailor your business plan to the target audience
A business plan serves a number of purposes and you may have to modify information depending on your target audience.

Your bank will be interested in:
how you intend to repay a loan or overdraft
what you are going to do with the money
how the loan will help the business to grow
what other loan or debt commitments you have

Most lenders operate a credit-scoring system. Make sure you give up-to-date and relevant information. A good relationship with your bank manager will not influence the credit score - the manager may have discretion to negotiate terms but not to change the decision itself.

Tell potential investors about:
what you are going to do with the money
when and how you are going to pay it back
the expected return
your other sources of funding
your management's track record
Include a detailed forecast of your profits and cashflow.

Indicate to shareholders:
the prospects for the share price
how they may be able to sell their shares
what dividend they can expect on their shares
your management's track record
what say they might have in the business

Demonstrate how they can exit with positive returns within three to five years.

Many businesses with growth potential fail to raise funds because they lack investment readiness, ie they do not understand the expectations of investors, cannot turn proposals into attractive opportunities or are unaware of financing sources.

Common reasons why business plans and loan applications fail include:
a weak management team
a flawed marketing plan
unrealistic forecasts
incomplete financial history
poor presentation

Demonstrate your commitment to the business
If you want to attract outside funding, you need to show that you are committed to the business. You will also need to either show that you have a good credit history or, if not, explain why not.

Demonstrating your personal financial commitment
To attract funding, you need to invest your own money in your business. If you are not prepared to risk your own capital, a lender or investor is unlikely to want to risk theirs.

Therefore, your business plan needs to show the extent to which you are committing your own resources.

For example, you should mention that you are:
investing your own cash in the business

reinvesting profits from the business rather than taking dividends yourself

using your own assets and guarantees to raise funds, eg by remortgaging your house

finding funds from family, friends and existing investors
It is always helpful to detail the backing you already have from banks and other investors - especially independent investors. Remember that money attracts money. The more backers you have, the easier it is to attract new ones.

Getting the best from your business plan - key considerations
Your business plan is a tool you can use to attract new funds or as a strategy document. Give yourself the best chance of success by following these suggestions.
Doing your research

Before writing your plan ensure that you:
check that the help you are applying for is still available - you may no longer qualify

back up any assumptions you have made with thorough research

find out your own credit rating by applying to Experian or Equifax for your credit file - a small charge is payable

Writing your business plan
Write your plan in a way that demonstrates your commitment to the business. Give it a professional feel by using graphs, pie charts, photos etc, but use only one font type and colour.

Your plan should:
Be realistic - make sure you can justify any assumptions or projections and avoid being overly ambitious.

Highlight any potential financial difficulties - warn your bank or lender if you anticipate that you may not be able to meet a repayment. There is every chance you will be able to come to some arrangement.

Show how you intend to devise and implement effective cashflow arrangements, eg have clear procedures for chasing up any accounts receivable.

Once you have finished writing your plan, get someone to read it to spot spelling and presentation errors, and to ensure it's set out logically.

Getting professional help
Seek the help of your business adviser or accountant in compiling your business plan or loan application form. They will ensure that the financial information is compiled and presented correctly and that key areas stand out.

A specialist broker can help to find potential investors, usually for a fee and a percentage of funds raised.

Revising a business plan
Once you have presented the plan, ensure you review and revise it as your business grows.
If you are refused investment or a loan, take the criticism on board and consider how you might improve the plan for presenting in the future.

Wednesday, February 2, 2011

Startup financing: Where to get it?

Starting a business is seldom easy. Exciting yes as all you can think of at this stage are the opportunities and possibilities of the idea, how much profit you could be making and how great it will be not to have to answer to you grumpy manager any longer. With all the many perks to start a business of course there also the challenges and finding start-up finance will be one of the first that you will need to overcome. Today we know that there will be a range of possibilities from banks, to venture capital firms to business angels or private equity. Which way to turn will be the real question at this stage and probably for convenience sake the bank will be your first port of call as you know here to find it and have probably dealt with a bank before. But the benefits of other business finance sources should not be overlooked.

Once you have your business plan ready and have done a realistic financial forecast considering all the possible costs, the amount of investment you may need and how long you will talk to pay it back, should it be a lone then the next step will be to start the search for finance.

It's important that you start the search for Start up Capital with a good business plan that shows investors and lenders your company's potential. Follow your business plan with a thorough knowledge of the resources available and a determination to make your business a reality, and you should be on your way to uncovering a source that fits your new business's cash needs.

You should know that many financial institutions provide some type of small business loan program just for those like you who need Start up Capital to get their business off the ground. However in order for you to get your Start up Capital from a bank and fund your business you'll need a pretty solid business plan. You'll need to earn your Start up Capital from the bank by proving that your business will generate enough cash to make the loan payments. Each and every bank will have its own requirements that will differ from other banks, but if you will be able to articulate how exactly your business will succeed, and if you have decent credit, and maybe a co-signer as well, you may be able to get your Start up Capital through a small business bank loan.

When you're looking for Start up Capital, you should look at what the SBA or Small Business Administration has to offer. The Small Business Administration is a great resource that will provide you with information on requirements, on credit factors, on how to apply for loans and many other important things you'll need knowing. Giving them a look-see would be a great starting point before attempting to apply at a bank; the better prepared you'll be the easier it will be when you'll begin the application process.

Now let's not forget that a lot of small businesses get their Start up Capital from family and friends. Your family and friends usually want you to succeed and will believe in your business. However if they are indeed providing you with your Start up Capital then it would be wise to treat these relationships as real business relationships and plan how and when you'll repay their loans, the exact time frame and at what interest rate.

You could also get your Start up Capital form private angel investors and venture capital firms. These two work generally in the same way they will invest in the equity of your business and expect a return in the form of an acquisition, IPO or stock buy-back in the future.

The key to any of the above mentioned methods of getting Start up Capital is to have a well written business plan. Having a good business plan will show your would-be investors that you are serious about your business and that you can demonstrate the way you plan on making it successful.

Don't be overwhelmed by the process. You are in many ways bringing as much if not more to the table. Investors in what ever shape or form will benefit from your business in a big way if the venture takes of so make sure you get what is most beneficial for you and your business.