Initial corporate funding

SHARE   |   Thursday, 23 May 2019   |   By Keabetswe Lianna Koorapetse Dithebe Corner
Initial corporate funding

There are unpredictable situations in life that remind us that life is short. Being aware of this has had many of us stuck between living for today and preparing for our future. The general assumption has been that we can only choose one of these options. However, we can do both.

Having big dreams and goals can be a good way to give ourselves a sense of purpose in life. Striving to achieve something greater than ourselves and doing our best can give us great satisfaction. Easier said than done. Many of us are guilty of making excuses to justify our lack of action towards achieving our goals. Some of us have used excuses such as not having enough time           or being too tired from our main job. Everyone has the same number of hours in a day, and all of us are responsible for how we use them. The world has evolved and working smart is the new working hard. Also, fear often plays a role in us delaying our own action plan. As many have said, the first jump is the scariest and there is never really a perfect time to start.

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Our financial planning topic for this week is INITIAL CORPORATE FUNDING. The initial funds of a business can be vital for its success. Note that not all dreams and goals require funding. There are many cases of businesses that have started without any formal funding for working capital. For those that do need funding, knowing what our business needs over what our business may want is a good first step. Understanding this difference will help us organise the priorities of our business.

Ways of raising initial corporate funding include the following: saving; government loan/grant; business loan; private investor; and BSE Listing.

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Saving

The saving habits we built in our personal financial planning can be used in our corporate financial planning. We can regularly put funds aside over a period of time. Once our funds have accumulated, we can then invest them into our business. Let us keep in mind that all funds we pour into our business become part our loan account to our business. Therefore, keep a receipt book to record these transactions. Keeping detailed records will assist in justifying future withdrawals from company profits back to ourselves. Remember, our business is an investment and we hope for reasonable rates of return sometime in the future. 

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Government loan/grant

Government loans and grants such as those offered to the youth, can be a good avenue to explore for initial corporate funding. This is a debt option that consists of a free grant portion and a low interest repayment rate portion. This option would be a good one for certain sectors that may take a longer time to produce reasonable results and return on investment.

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Do know that several government business support structures such as LEA (Local Enterprise Authority), BIH (Botswana Innovation Hub) and CEDA (Citizen Entrepreneurial Development Agency) currently exist in our country. They aim to provide us with services that range from building up our ideas to acquiring large amounts of funding for our business operations. With offices all over the country, do visit their websites or drop by their offices for more information.

Business loan

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A pure business loan can be acquired from places such as commercial banks. A business loan is another debt option we can consider for our initial corporate funding. However, it has a higher repayment interest rate than that of a government loan/grant. Any debt taken out, will give us an obligation to pay it back. Always carefully read all debt repayment conditions, especially those in the fine print.

Private investor

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We can consider seeking out a private investor to contribute a certain amount of funding into our business. And in return, we can offer a certain number of shares in our business and/or arrange a share buy-back agreement. These investors can be from anywhere around the world. Be mindful to thoroughly read the contracts involved in this option to be on the safe side personally and for our business.

BSE Listing

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For the opportunity to raise large sums of funds, we can join the newly launched Botswana Stock Exchange Tshipidi Mentorship Program. This program is designed for young companies and start-ups. It aims to educate and explore the possibilities of these companies to list and actively participate on the BSE. Contact the BSE for further information.

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Remember, money is a tool that can help us achieve our corporate financial goals. But, it is not the only tool. Similar to our personal financial planning, the main focus of corporate financial planning is to identify, evaluate, elaborate, plan and achieve our business goals.



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