Need Small Business Finance? Who Do You Call?

Ghostbusters, a Mentor or Business Advisor?

The Ghostbusters can’t help you, but a mentor or professional business advisor certainly will. However, the process of accessing funding can be tricky, and you’ll often need assistance. It will therefore be useful to have a clear understanding of the difference between mentors and business advisors, and how they can each assist you in different ways.

A considerable amount of education and guidance is needed for entrepreneurs to develop as sustainable business leaders. An integral part of this education and guidance hinges on successfully raising the finance needed to ensure that their businesses flourish. Understanding the options is the first step in what could potentially be a game-changing process.

Darlene Menzies, CEO of Finfind explains:

“A mentor is a seasoned business person who is on hand to help you develop as a business leader. They carry seasoned experience in all facets of sound business practice, and can guide you through the process of accessing funding. They are essentially a sounding board, providing guidance on submitting funding applications; they don’t do any of the actual work, but rather have a wealth of experience that you can tap into. They usually have a vast network of contacts who can assist with the preparation of your funding application. One of the main differentiators of a mentor (versus a business advisor), is that there is usually no charge for their services.

“A business advisor is an industry expert, paid to provide the service of getting you ready for funding, with the expertise to assist you in preparing your funding application. They have sound knowledge regarding the different types of funding products that exist, so they can advise on the ones that best suit your particular funding need. Their sound product knowledge is supported by a tool (such as Finfind) which they use to explore funding offerings, as well find unique funders to approach. A pivotal part of their service is assisting you to position your funding application to best meet funders’ requirements and the specific documentation that needs to be submitted with your application.”

Understanding the documents and processes associated with access funding applications.

As a business owner seeking finance, you will be required to submit various documents to funders. The three main reasons for these documents are:

  1. To assess if your business is eligible for funding.
  2. To ensure that your business can afford the requested funding.
  3. To confirm your business’ statutory compliance.

“This is where the experience of business advisors really comes to the fore. Compiling the necessary documents required for the application process can be quite daunting, and they will assist you throughout the process,” explains Darlene.

Documents needed may include:

  • latest annual financial statements
  • up-to-date management accounts
  • latest VAT statements
  • three months’ bank statements
  • cash flow projections
  • any outstanding debtors
  • signed customer contracts
  • a business plan

Other supporting documents required to confirm statutory compliance include:

  • business owners’ ID documents
  • business owners’ marriage certificates (if applicable)
  • company registration documents (CIPC documents)
  • the business’ lease or mortgage agreement
  • tax clearance certificate
  • shareholder agreements
  • share register
  • proof of business address
  • any relevant business licences, accreditations or registrations, amongst others

Because the list of documents required can be very extensive, few businesses have these in order, and ready to submit with a funding application, which is why expert assistance is needed to concisely and effectively position them to funders.

If you would like to pursue the mentor route, there are some questions you need to ask first.  It’s important to ascertain the success rate that any possible mentors have in securing finance, so some pertinent questions to ask them include:

  1. Does the mentor has relevant and extensive experience in raising finance for their own business, and have they assisted other SMMEs to raise finance?  Ideally you want to work with an experienced mentor who has helped businesses in similar sectors to yours, doing a similar kind of work, and who have a good success rate in securing finance.
  2. Do they have good contacts as far as experienced business advisors and small business accountants are concerned? Do they have a vast network that you can access when compiling the documents needed to properly position and package your funding? It is not easy to find experts who are affordable, are accredited and have experience raising the particular funding you need for your business.
  3. Is your mentor willing to provide their time and support as they walk alongside you, at no cost? Remember that mentors do not usually take fees for the guidance they offer.

What financial requirements should you have in order before approaching a mentor?

It is vital that you understand what your current financial position is and can articulate why you need to access funding i.e. what the funding will be used for.

  • How much money do you currently have in the bank?
  • What money is still expected to come into the business?
  • What business is forecast in the future?
  • What current expenses need to be paid?

These are some examples of what your mentor will need in order to understand the urgency of your application. It will also give them insight into future prospects.