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Raising Business Finance through Sale of Shares - Uzenzele blog

When one thinks about bringing on (a) BEE shareholders, most business owners say “why should I give my hard earned business away” and as a business owner I could not agree with you more.

 

Giving shares away doesn’t make much business sense, however, selling your shares to raise money for your business or to cash out and have some liquidity for all your hard work may be more appealing.

 

Combining the reasons you may look at raising capital for your business in conjunction with having a BEE partner is a formula that can convert your business into a real investment asset for you.

Let’s have a look at the main reasons a business may need finance:

 

Finance expansions to production/operational capacity

As an enterprise grows and develops, it requires greater capacity and new technologies in order to cut unit costs and keep up with its competition. New technologies can be somewhat expensive to a business and is seen as a longer term investment, as the initial costs will outweigh the savings or additional income generated for a significant period of time. New technologies include computer systems, machinery and tools to perform processes faster, more resourcefully and with superior quality.

 

To develop and market new products

In today’s highly competitive environment competitors are constantly updating their products, a business needs to invest money to develop and market new products or services. These costs are not normally covered by sales of the products for some time (if at all), so money needs to be raised to pay for the research. In order to ensure faster time to market and the appropriate funding toward the innovations, funding may be welcomed.

 

To enter new markets (and/or to retain existing market)

When a business seeks to expand it may look to sell their products into new markets, perhaps you have not been successful in many government and private sector tenders due to your status.

 

Take-over or acquisition

When a business buys another business, it will need to find money to pay for the acquisition (acquisitions involve significant investment). This money will be used to pay owners of the business, which is being bought. Perhaps you are looking to integrate your value chain either forward to clients or backward with suppliers, these acquisitions can be done through BEE Funding mechanisms for employees or individuals who will be involved in the operations of the business.

 

To pay for the day to day running of business

The day-to-day operational costs or working capital requirements are typically what hinders business growth and the ability for business owners to reap the financial rewards of their business. BEE deals can generate much needed cash flow for your business and with certain fund they can also pay you out for your shares.

 

With both the financial injection and status overhaul your business growth is in the making.

 

There are two forms of funding for BEE buyouts, the first being the purchase of shares by a black South African (African, Coloured, Indian or Chinese) person or grouping including your employees.

 

Contact professionals regarding BEE and funding options for an optimized combination solution.