Financial Adviser | In need of capital for business — Where to begin
Published:Friday | April 15, 2016 | 12:00 AM
I am a young entrepreneur pursuing a career in the business world. My main aim is to start a small business, but I am having a lot of difficulties and obstacles in my way. I seek help from you to aid in structuring the business and to create a business plan. I want to set up a restaurant, quite likely as a sole trader but the main problem is generating the capital to start the business. I need your advice.
-Andrew
FINANCIAL ADVISER: I get so many requests for advice from individuals wanting to start a business to secure themselves financially but lacking the financial means and the knowledge of what to do. I will focus today on one entity that can be of great value to aspiring entrepreneurs: the Jamaica Business Development Corporation (JBDC).
The JBDC offers a wide range of services to the micro, small, and medium size business sector.
Micro businesses are defined as Jamaican-owned businesses that employ up to five persons and have an annual turnover or sales of $10 million. Small businesses employ between six and 20 persons and have an annual turnover of between $10 million and $50 million. Medium-sized businesses employ 21 to 50 persons and have an annual turnover of $50 million to $150 million.
Much of its emphasis is on the productive sector, so it should not be surprising that it looks quite favourably on the manufacturing sector. Businesses in agro-processing, craft, and nutraceuticals are among those that benefit from its services.
But it also serves service-based businesses. Your proposed restaurant business, cosmetology, and taxi services, for example, would qualify.
The JBDC is willing to extend its services to any legally recognised business, meaning one that is registered with the Companies Office of Jamaica. Your proposed business would therefore qualify to access its services if you choose to register it as a sole proprietorship.
Your main challenge would be the capital. You would need to invest your funds, meaning you would need to have savings to do so. Short of this, you would need to borrow from family or friends or a lending institution.
But you could opt for another type of business organisation if you are not comfortable with borrowing. You could opt to set up a partnership with people you trust and benefit from the capital they would bring to the business as well as from their expertise and access to their network. Although they would share in the losses, if any, of the business, they would also share in the profits.
You could also opt to use a limited liability company as the vehicle for owning the business. This would offer greater scope for protecting your personal assets in the event of the failure of the business but make available to you a wider pool of persons to provide capital, expertise, and networking opportunities. You could risk not having the level of control the other vehicles, especially the sole proprietorship, would give you.
The JBDC would be able to offer counselling in developing your business model and marketing. Other services include market research, the writing of proposals to seek funding, and training and mentoring in financial management. It charges for some of its services, though.
It does not itself provide funding but can direct you to lending institutions. You would ultimately have to decide from which institution to borrow. The following website has quite a comprehensive list of lending institutions that you could consider: www.dbankjm.com/loans-through-afis.
If you do not have savings of your own to provide at least some of the equity for the business, you must make it a priority to begin to save now. You should also consider if you are prepared to take on the risks of entrepreneurship and if you are prepared to invest the time required to start and maintain a business.
Oran A. Hall, the principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.