Access to funding has proven to be a major stumbling block facing SMMEs within the developing economies. Funding and financing are the key requirements to establish a capital and start building a business. Money seems like a serious cause of great concerns that can lead a business to failure. Whether money remains the only problem towards establishing a sustainable business, is a question that can produce endless findings because of different views from a diverse community. In simple terms – it depends from an individual answering the question. This can include small business owners and entrepreneurs with unique backgrounds or understanding of how to establish or run a sustainable business. For example, common mistakes often committed by new entrants venturing into businesses often arise when a business owner is expecting an instant profit. Young and ambitious entrepreneurs start a small business with a hope of securing funding from government institutions or at least financing from the banking sector, assuming they will earn big to repay the money and further invest in their businesses.

However, there are several challenges that prevent business owners to gain access to funding, or financing from the banking sector, not to mention government institutions. Similarly, applying for a bank loan has some pros and cons. One of the advantages is the flexibility of how long business owners repay the loan. The downfall is that bank loans tend to accumulate higher interest rates as compared to other available options. Business owners are required to showcase a good credit rating for any bank to approve their loan applications – at least with reasonable interest rates. It’s quite evident that the funding and financing are not always easily or immediately accessible to small business owners, and as a result, it becomes even more cumbersome for entrepreneurs to sustain their start-ups from short to long term. Unlike large corporations that are often backed by major shareholders or wealthy individuals, small businesses don’t have such luxury of starting up with a lot of funds. This is arguably the biggest challenge faced by entrepreneurs when trying to get their start-ups off the ground.

On the same line of thoughts, there are several few options available for funding a start-up and one of the key suggestions is that entrepreneurs should not start a company until they’ve saved enough money. This is perhaps viewed as an ideal situation because when there is “no loan means no interest, and no interest means less loss” – just in case things don’t work out as planned. However, this is not always viewed as an acceptable option for most entrepreneurs; how business owners support themselves for a living whilst saving and investing their money is a matter still broadly open for debates. What is clear though is that the cost of living has gone up in recent years and to strike a proper balance is sometimes viewed as a challenging task to accomplish. Entrepreneurs are also humans and they must live, and this can only mean living off savings whilst trying to create another source of income.

It’s a big challenge for smaller businesses to build up credit and provide financials worthy of securing business loans and lines of credit needed to grow their start-ups. Being aware of all the financing options is not enough, small business owners should understand clearly the pros and cons of each and how to qualify for funding. Entrepreneurs should also consider working together with well-qualified accountants to help them with educated advice and keep their books in order. This is necessary to minimise tax liability and making their balance sheet to look more attractive to the lenders.

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