Why Cashflow Investing?
On the one hand, small businesses create over 90% of new jobs. On the other hand, fear of the financial consequences of failure stops many aspiring entrepreneurs from starting their own businesses (for South Africa see 2016 Global Economic Monitor Report).
Data from the 2015 GEM survey (the 14th in which South Africa has participated) confirm South Africa’s persistently low levels of entrepreneurial activity relative to other countries participating in GEM. Although 2015 sees an encouraging increase in the number of South Africans who believe there are good opportunities for starting a business in their area, as well as those who believe that they have the necessary skills, knowledge and experience to start a business, this has not translated into higher levels of entrepreneurial intention.
For small businesses to create secure jobs, they need to be more secure and sustainable. Cashflow Investing offers an effective tool for developing competent entrepreneurs. Here are two ways in which Cashflow Investing helps to develop better-equipped entrepreneurs;
- Changes Thinking Habits. Cashflow Investing provides a salary-like “big stick” accountability that many aspiring entrepreneurs need to change from an employee mindset to an entrepreneurial approach to doing business. It takes about three months to break a habit and up to six months to build a new one; Cashflow Investing serves as an excellent transition tool.
- Creates a Positive Environment. Cashflow Investing provides the steady cashflow needed to reduce fear and negative emotions during the early stages. Positive psychology demonstrates that individuals make better decisions when negativity is under effective control.
Is there a need for Cashflow Investing?
Many small businesses need small amounts of working capital for short periods of time. This need is clearly demonstrated by the success of lenders such as Merchant Capital, Retail Capital and Cashflow Capital. Visit these websites and you will quickly see that these loans are only available to borrowers who have;
- A credit card facility.
- A six-month track record of credit card sales.
Empowered Capital’s Cashflow Investment strategy is slightly different; a combination of the TOP Business Development System and direct, day-to-day involvement with the entrepreneurs, gives the Empowered Capital team far more control over the funding and influence over the sponsored business owners. Risk is reduced and the probability of success increased.
What will the money do?
Empowered Capital is expanding two ventures in Gauteng by creating new business opportunities for aspiring entrepreneurs to work in small business support; opportunities than can serve as an excellent prelude to starting their own ventures. To open a new area an entrepreneur requires a small, monthly injection of working capital to achieve the required growth trajectory.
A R90,000 cashflow investment can fund up to four new areas during the year.
What is the Capital Protection Plan (CPP)?
The CPP is a unique strategy designed to eliminate the cost of failure for entrepreneurs and investors; by first protecting the opportunity cost of the investment (i.e. interest) and then protecting the capital itself.
- Three months to protect the opportunity cost of the investment.
- Six to nine months to protect the capital.
The CPP is only available to Empowered Capital’s strategic partners and investors.
What does ‘performance-based investment’ mean?
The Cashflow Investment commitment is made over two quarters;
- The first quarter’s commitment is the cash that is ‘at risk’.
- The second quarter’s commitment is subject to the venture,
- Achieving specific milestones, and
- The CPP Fund confirming that the opportunity cost of the investment has been protected; at which point risk has virtually been eliminated.
What happens if a Cashflow Investor is unable to make payments?
If a Cashflow Investor is unable to meet their obligation in terms of the Cashflow Investment agreement, the following will happen;
- The investor’s account will be blocked from receiving any further deposits.
- The option to convert to equity will be revoked.
- Quarterly interest will continue to be paid on the account balance.
- The capital will be repaid on the agreed maturity date.
The investors account with Empowered Capital will be closed when the capital has been repaid.