Lets face it coming across cheap money isn’t easy these days, especially with the NCA (that’s the National Credit Act for you non-South African readers), not to say that legitimate loan sharks are not rife though! Actually, its quite frustrating because every fortnight my physical mail box is full of “you can have R40000 in your back pocket tomorrow” and “don’t you dream of that new kitchen” nonsense!
Let me explain, there is good credit and bad credit. Bad credit being the credit i just mentioned above. We all know the saying “there is no such thing as a free lunch!”, well the same holds true for free money –> it DOESN’T exist (unless you have a loving giving parent, in which case id love to meet)
So don’t get suckered thinking there is an opportunity for cash-flow! Because its not. You will end up paying sometimes more than double back and find yourself in debt when you could be enjoying the fruits of your successful business.
Now don’t get me wrong, there are ways, and by ways i mean ways to attain cash (not for free) but cheaply. Angel investors might give you a wad of cash to float you business but we can chat or arrange that another time. For now lets touch on good credit. This comes primarily in the form of your suppliers and the better your relationship with them and the bargaining power they have, you could find yourself making profits for free.
Lets look at an example.
Lets say you have some clients, not many, but enough to keep you afloat. Okay, so you provide goods or services to them that you get from your supplier. If you have a good relationship with your supplier you can arrange better terms of payment and even a leka (South African word for Great) discount. Now if you have a great customer satisfaction rating with your clients, you will probably find that they will pay you relatively soon and then you can use that to pay your suppliers without incurring any interest expense and you business gets to pocket the discount earned.
In closing, its important to have a decent cash-flow for you business and if you are starting out as a one man show try save until your business has about 3months of cash-flow. This will put you in good stead with banking or investing intermediaries and save you a world of unnecessary stress. Cash-flow is king, it doesn’t matter what you business is worth if the bank owns 3/4 of it.
If you are looking for support in finding funding or marketing your product don’t hesitate to drop us a message at http://www.mystuffs.co.za/contact-us
