Company growing at a rapid rate, when is it time to look Pty Ltd

[Soundinmind]

Hi everyone,

I started my company in April of this year and its growing at a rate that I cant seem to control all the time, my problem cames in that I have to many people looking to make use of my company but I dont have the capital to match their needs, I started the company with selling my car and collecting all the money I could but now its only enough to fund one expansion at a time, mean while I have 5 expansion knocking at the door but I dont have the credit record or capital to fund it. Someone said I should look into becoming a Pty Ltd and sale shares in my company but I know this is a massive move forward, especially after 3 months of being a sole owner under a CC. When is it normally the best stage to move to a Pty Ltd?

[Dave A]

Someone said I should look into becoming a Pty Ltd and sale shares in my company but I know this is a massive move forward, especially after 3 months of being a sole owner under a CC.

Taking on shareholders is a massive change, but it's no guarantee that it's a step forward - it could be a step backwards if you're not careful.

Will you be making more money?
Will you be able to keep control?

Have you tried merchant banks like Rand Merchant Bank first? Yeah, they'll want shares, but the stake is reasonable, they come with sound business advice and they're not looking to push you out and take over the show (unless you stuff it up).

[BusFact]

Only change to a PTY if your investor (if you ever find one) insists on it. This would normally be so that a company can own shares in the business - which is not possible if its a cc. Otherwise a PTY costs a lot more to run than a CC, so this will but additional pressure on your cash flow.

Why is it necessary to grow so fast? Simply use your after tax profits to fund growth. Increase your prices a bit and choose the better paying customers. Turn the rest away by politely saying you can't help at the moment.

It may mean you only double in size every year instead of growing 10 fold, but no stress, no meddling partners and no debt risk.

[Soundinmind]

Ok, that puts it into a good idea for myself. Im starting to also hit my budget wall on what I can fund and Im going to need to find a loan or investor in order to have the business grow at the rate it is. This is extremely hard for me as Im on the door step of success already but to carry on I need more funds and the banks wont loan until we pass the 6 month mark and also the fact I dont own a house... sad world of business.

Question of the day: How does one find investors or someone to loan from?

[AndyD]

Approaching a venture capital company would be an obvious one. They will lend according to how they see your business model, Their rules on lending are often less set in stone and they're often more apt at dealing on a individual level than the regular banks.