The smaller the business, the harder it is to access affordable funding. That's a fact well-demonstrated by the graph below.
The fundamental problem lies in the relationship between high perceived risks and potentially low returns from investments in small, community-based businesses (tech startups are excluded from our definition of "small business").
But does it have to be so? I have spent the past few years working on a way to make small business investment more attractive to lenders and investors, I call it Cashflow Investing and it focuses on three things;
1. Reducing risk by addressing the main causes of failure
2. Increasing long-term returns to investors
3. Protecting the capital in the event of failure.
I've put together a short presentation of the basic concept. To prove the model, I have enrolled two investors who will join me by investing R100k each over six months; by the end of April I must prove that the opportunity cost of their investment has been protected (i.e. even if the venture fails they will continue to get the agreed return; their capital will be fully protected by February 2020). The venture is a small-scale construction project.
Here is the link to the presentation.
This article was first posted in a Facebook Group called "Financing your Business"
Watch this space. I will share the journey.