Debt or equity financing: Which best suits your business needs?

Aubrey Masango speaks to Andisa Ramavhunga, Group Chief Advisor at Ntiyiso Consulting Group.

Listen below.

Businesses are predominantly financed by banks, equity funders and grants. 

Before considering which route to go, it is important to know which stage your business is at in order to decide what type of funding you need. 

Ramavhunga outlines the four stages of a business – start up, growth, matured and declining. 

Different stages of growth and development means different challenges and needs. 

“As the business grows, its chances of survival grow. Naturally that business will attract different types of funders as it grows.”

- Andisa Ramavhunga, Group Chief Advisor – Ntiyiso Consulting Group

Start up businesses are often funded by the entrepreneur themselves or angel funders – friends and family. 

“No one will typically fund a start-up business, hence you have the FFF – friends, fools and family. People who have got lot of cash, a high appetite for risk and have a connection to you… Entrepreneurs will typically cash out their pension fund or rely on their personal credit line.”

- Andisa Ramavhunga, Group Chief Advisor – Ntiyiso Consulting Group

“Banks will naturally not look at that type of business as the risk is too high… they look for consistent cash flow… you have not proven yourself.”

- Andisa Ramavhunga, Group Chief Advisor – Ntiyiso Consulting Group

It is important to exercise your options, says Ramavhunga. 

“Funding should be treated like strategy, it’s a problem-solving exercise.”

- Andisa Ramavhunga, Group Chief Advisor – Ntiyiso Consulting Group

Scroll up to the audio player to listen to the discussion