Are business plans and bank finance still a thing nowadays?
What's the typical approach these days when looking to fund a business and one has no assets for surety ?
Business plans and Bank finance are two completely seperate things
Sorry to be a stickler
Simply - There is a basic requirement of debt to any business from Banks. Generally 2-3 years of proven operational activity and profitable activity can be show. This is done through the following
A transactional account, your business opened with the Bank
Financial statements of proof of funds, audited (not a backyard accountant/auditor please). Proper financials
Letter of good standing or remuneration report and declarations to SARS
All of this is required for a business to obtain a loan. I dont go into other specifics as each loan and product has a different requirements, capital, security etc
So to summarise here, business needs an account and needs to be operating for atleast 2 years - as far as I am concerned and the requirements I have seen in just about every bank I have worked for is this
A business plan, and obtaining finance from a business plan will generally NEVER be financed if the business cannot show profitability and it actually is operating... ok, so where do I go, should be your next question.
I am afraid this is where we get to SME, Tier 2 funding. To give examples of places you will find success, look up Sparta/Spartan Finance, Merchant west, SME funders. There could also be crowdsourcing and venture capital depending on your scale.
You will notice on the second option, business plan wise, your interest expense and the price of the lending when the business is not been operating and cannot show profitability is very difficult. Welcome to the problem sir. Why do you think so many small business owners run out of options or dont know where to go. Because there is nowhere really to go. IDC you could try, but its a long long winding process. At the tier 2 funding level, most are either squeezing you from an interest perspective, meaning its not viable, or they take an equity portion and run your business into the ground, if not partnered right
Whilst the above isnt exactly a pretty response, it is fact. This is why at all stages, most will tell you. Run it as a side business, get it off the ground. Operate and see if you can get it to the stage that its a viable option.
One does not simply walk into a bank like we did in the 80s and 90s, with a business plan and a dream and all of a sudden money drops into your account for the dream... this is hollywoodised completely. Its not how business is run. Its why most small business fail or dont even get off the ground. It is also the further reason why most owners refuse to grow beyond this and scale, because then there is little to no control on the path for the company.
