Raising capital to start own business is one major challenge that deters many from joining the league of entrepreneurs. There are however many options which if pursued strategically can still yield the desired funds, below are some viable options you can explore.
20 OPTIONS TO RAISE FUNDS FOR YOUR BUSINESS...
1. Personal Savings
Personal savings is one good way of raising capital to start a business especially for someone who is presently in a paid job. This is a great idea because when you start your business with personal savings, it makes you actually your own boss as you are not answerable to any investor or bank.
Raising money through personal savings can however be challenging as most salaried workers struggle to keep their expenses within their earnings.
The secret to savings is planning, self discipline and determination. You can save 10% of your earnings without necessarily lowering your living standard; and if you do this consistently for five to ten years you could have saved enough money to start a business.
One way to achieve this is to open a Savings account with a bank and give a standing instruction to the bank to transfer a specified amount to the savings account (from your salary account) at the end of every month, and you commit yourself not to withdraw from this saving account until when you are set to start your business.
2. Family and Friends
Raising Capital from friends and family members is one very viable option of raising capital for your business. This may come as a gift, an interest free loan or loan with interest; in whichever form it comes, it may be easier to access than from banks.
One advantage here is that the conditions and expectations from your friends and family will not be as stringent as that of the banks and other finance houses. The entire funds you need may not come from one person, if you need for example fifty thousand dollars, you can make a list of 10 friends/family members that can give you five thousand dollars each; or 100 persons who can give you five hundred dollars each.
Don’t be afraid or shy to ask especially when you have a good and viable business plan because these friends and family members will be proud of you when you succeed and will be glad they helped you or invested in your business.
When you approach any one for funding, have a detailed and well researched business plan and not just an idea. Do not seek the money as a gift but offer to pay back (even with part of the profit) in a specified time. You also need to be passionate about your business and show good commitment to it to attract positive responses from these friends and family members.
3. Bank Loans
Bank loans are still a major source of funding for most businesses, though getting loans from the traditional banks to finance a new business can be very difficult, there are some government loans or government guaranteed loans that are more accessible to entrepreneurs. The challenge with such loans is meeting the conditions and most times being able to go through the bureaucracies of most government offices.
Getting funding from banks can be challenging as most banks have tightened their lending policies. The banks' major concern in all these is to safeguard the depositors funds and make some profit, by ensuring you can pay back both the principle and the interest that will accrue. The following tips can increase your chances of securing a loan from a bank.
• Have a good relationship with your banker and ensure your account has a good track record.
• Have a concise statement of how much you need, why you need it and when you need it.
• Have a plan of how you intend to repay the loan.
• Have records of your business (previous activities or projects, account statements, cash-flows etc)
4. Angel Investors
Angel investors are high net worth individuals who provide funds for start-ups in exchange for equity in the start-up businesses. An angel investor can be a wealthy friend, relative or church member who is convinced on the prospect of your business and decides to invest his/her money in your business and taking up part ownership of the business.
5. Venture Capitals
Venture Capital is a type of funding for start-up or companies at early
stage which are seen to have high growth potentials. These funds are provided
by private investors who exchange this funds for equity in the company being
6. Supplier Credit.
You can actually fund your business with credit from your supplier or suppliers. This is an arrangement where your suppliers provide you with goods (or raw-material) without demanding outright payment. You are then expected to sell and then pay the agreed price of the supplied goods to the supplier. This way a start-up can be funded or a small business can be expanded. One factor that can help in securing this type of funding is the integrity of the entrepreneur and his/her ability to sell off the goods in good time.
7. Sell of Tangible Assets
You can sell your tangible assets like land, cars, houses, gold etc to start your business. This is one viable means of raising funds that people ignore. There is actually no need holding fast to assets that can yield you the required funds to start your dream business when you can sell them start your business and possibly buy similar or even better ones when your business starts thriving.
Franchising : You can raise capital for your business by selling franchise of your business, in this case you have to start and build your business into a great brand, you can then use this option to expand your business. To successful sell your business as a franchise some things are important. You need to know your business very well, and you have to document the process to a finite detail. You also need to understand the legal involvement and you should have a structure to support those who buy your franchise.
9. Crowd Funding
Crowd Funding: This is the
practice of raising money for business from large number of donors
who typically give small portion of the total sum. This is normally
done through an online portal or events designed for the purpose.
Some popular crowd
funding sites include, Kickstarter, Crowdfunding for everyone, Indiegogo,
Crowdrise, crowdfunder, rockethub etc.
10. Share Certificates
Sell your share certificate to raise money - You can sell your share certificates to raise money if you have bought or inherited a number of shares
11. Borrow From Religious Groups
Borrow from religious groups - You can get loans from religious groups you belong to especially if you are a very committed member. Religious groups are always interested in their members success and will be willing to offer financial help to their members especially when those members are in good standing and have good business ideas.
12. Fund Raising Events
Fund Raising Events - You can organize fund raising events in your locality or circles where you are known, a good idea is to tie the fund raising to things like a book or music, hence you can write a book launch it and use the proceeds to start your business.
13. Non Governmental Organizations (NGOs)
Non Governmental Organizations - There are some non governmental organizations that are committed to helping entrepreneurs, you can approach such organizations to get some funding
14. Entrepreneurship Competitions
Some government and private organizations occasionally organize entrepreneurship contests and winners are given varying amounts of grant to start their business. E.g Diamond Bank Plc annually organizes BET contest and winners are given some grant and training to start or expand their business; You-Win was a contest organized by a government agency in Nigeria that offered up to 10 million naira to winners to start a business. You can look out for such contests if you have a very bright business idea.