Funding advice

[Chaz]

Hi Chaz

Your problem is not an uncommon one and the biggest stumbling block to small business development in South Africa, in my opinion, is access to funding.

I work for GroFin out of the offices here in Umhlanga and we do viability based lending, in other words we look at the viability of the business when considering an application rather than the collateral available. As it is higher risk though it is more expensive.

The funding of stock with a medium term loan however may not be the best but as a start it may be worthwhile considering.

Happy to discuss it further and suggest you visit our website at grofin.com for some introductory information and then would be happy to get together to discuss.

Regards

Hi Gary, thank you for the advice. I will contact you soon.
Does collateral as work in the form of the products? IE: if i have say about R10 000 worth of stock that I purchased, is it also classified as collateral? Or if I have R10 000? Are you similar to SBDC? As they take a share in the business?

[Chaz]

So the problem is bigger orders and capital tied up for longer, then?

Sort of... If I purchase small orders and have sent via postal or courier, it is very expensive. But if i bring in say 200 units the costs are much lower, and stores would purchase. But to have stock on hand as they place orders is needed. As how does one get access to say about R80 000 for over 200 units. I can market it, put as they show interest they want the stock within a few days or some want an account. The potential for this product is huge and people that have been using it are seeing results in a short time.

[Blurock]

How does one get funding to import products?

I do not have collateral, but am the sole authorized distributor for a international company.

I want to bring in a LCL of products to market it. My business was registered in 2008 and not really trading. I have been getting the products registered, marketing and selling the odd few products i brought in with my own money.

The market is big and there is a demand. The product uses a special trade marked manufacturing process. How does one go about it?

How do I approach for financing, and approach retailers telling them it cod, but they are scared to pay upfront and still wait 30 days for shipment?

Any advice please!!!!

There are various institutions that will provide trade finance to import. I need to know more about the product though - is it to be assembled/manufactured or altered in any way and what volumes will you be trading? Why does your principal/supplier not provide terms? Once landed here, you may consider factoring - providing you deal with reputable buyers.
Good Luck
BluRock

[braganza]

Your dilema is something shared with numerous small players without good trading history.

Your alternatives are as follows:

If the demand is as good as you say, you should have no difficulty in finding private investment capital.

You could always look for established businesses in the same category and do a deal with them to distribute your product. Whilst you may make less margin, you should then be able to build volume and thus collateral to increase your investment over time.

Hope these thoughts assist.

[Justloadit]

Something else to factor here.

You bring in a container of product, and it is not quite to specifications. Do you send the container back or do you modify the goods yourself to specification? there are costs involved!
Who supplies warranty? Do you replace under warranty, or do you repair? This costs money!

Customs holds your parcel to check for days.

[Blurock]

Hi Chaz, I have to agree with the other opinions; you do not yet have a business, you only have an idea. To turn the idea into a business:
1. You need to convince investors (or lenders) that the venture is viable. This is extremely difficult as they need to see the (non existent) orders and cash flows emanating from it. Can you convince them?
2. You may approach and partner with an existing business which has the experience, infrastructure, distribution channels and funding to grow your product market. This may erode some of your own profit, but remember that 20% or 50% of nothing is still nothing! Their expertise may be invaluable to you and improve and shorten your learning curve.
3. You may take in a partner on the same principles as above, but make sure that he/she has the knowledge and resources to contribute to the business. You do not want a sleeping partner! Sleep does not generate business!
4. If you can obtain irrevocable orders from reputable (blue chip) companies, you can obtain funding on their credibility. Trade finance companies will arrange for import funding on the repayment ability of a debtor. Gary Simmonds may be able to assist you in this. Essentially this should be a self-liquidating transaction with no handling or repackaging. Delivery straight from the factory to the debtor.
5. Should you be able to finance the 1st import order yourself, the invoice can be discounted (factored), which will allow you funds to place the 2nd import order. Payment will be made directly from the debtor to the factor who will then release the retention (usually 30%). For further advice on this financing tool, you can send mail to grocashflo@gmail.com

Good luck on turning your ideas into profitable business. That is what entrepeneurship is about!

[Blurock]

I am interested to know what progress has been made to get this business going. Any positive results yet?