Page 38 - Nine Yards Magazine 2021/2022 - Old Mutual Corporate

taking the lead funding
HIGH-GROWTH STARTUPS THRIVE ON SCALE, AND
FUNDING OBTAINED IN FUNDING ROUNDS
IS EARMARKED FOR GROWTH CAPITAL.
Startups, on the other hand, tend to require capital when they’re in the pre- revenue or pre-profit phase, especially in their earlier years. Funding a startup requires more risk from an investor or lender because it involves equity and they’re joining an unproven early-stage startup.
DIFFERENT TYPES OF FUNDING AND WHO THEY’RE FOR Overdrafts
Overdrafts can be used to relieve short-term cash-flow problems when, say, you have to pay your suppliers before your customers have paid you. You would, or rather should, not use an overdraft as growth capital.
Often banks are comfortable with granting overdrafts to entrepreneurs who have passed their credit test and have a history of good cash flow into their business account. They don’t usually require security.
Structured loans
These loans are typically used to grow a business, for example, by purchasing equipment or a vehicle. Structured loans involve larger amounts than overdrafts and come with structured repayments, and therefore may require surety.
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