Preparing Documents For Investors

[wynn]

Banks will only provide finance for start up businesses if they are fully secured

In other words banks will only lend money to people that have enough assets to pay the loan back, eg. your house, they will see your family on the street first.

[Justloadit]

If I was a bank, and with statistics at over 90% failure of new businesses with in the first 5 years, it is no wonder that they take this as a very high risk, and to minimize the loss, go for surety on fixed assets or solid investments.

So we making the bank as the bad boys is actually not quite right, when we do use our homes as collateral, we are telling the bank that I am 100% sure that I am going to make it, and that is why I know I am not going to put my family out in the street

[Blurock]

In other words banks will only lend money to people that have enough assets to pay the loan back, eg. your house, they will see your family on the street first.

I do not think any bank will risk their reputation by taking security for a loan, knowing that the business will be a failure. It is not the intention of the bank to put your family out on the street.

I just think that with all their good intentions the banks do not have enough trained staff to be able to assess a business loan properly. There are some good ones, but there are some really bad ones too.

[Citizen X]

Hi Guys,

I would like to take this oppotunity to clear up any misconceptions regarding business loans from a bank for a start up business. In order to do so, I attach an official absa letterhead sent to one of my clients concerning the requirements for a start up business. Please see attached. The basic requirements include a business lan, 10% deposit of loan amount and clear credit hsitory. I have also phoned standard bank and got the same response.

[Dave A]

I didn't see the bit about a 10% deposit, but I did notice this:

Personal Assets & Liabilities of all involved parties

Any guesses as to why they're interested in that?

To make sure they're 200% + covered in sureties perhaps?

[Blurock]

Banks and lenders want to see owner commitment when considering a loan. They look for equity in the form of funds committed, equipment purchased or any other owner contribution. Hardly any one will give you a 100% start-up loan unless fully secured.

The four mainstream banks all participate in the Khula Guarantee scheme which will fund up to R3mil if approved. The 10% owner contribution relates to the Khula criteria, but does not necessarily apply to loans outside of the scheme. This also relates to start-up business finance and is unlikely to apply to an existing business which should have built up equity in excess of 10%, or else the business would not be sustainable.

More information is available at http://www.khula.org.za

[nico42]

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