Many businesses crash daily because of inadequate funding. To some people, lack of funds is just another excuse for not becoming entrepreneurs. This is unfortunate; you really don’t need money to develop your business ideas or write your business plans or draft a business proposal. These things are vital for your business development and growth. There are folks, however, who have done all that is required but still need money to get their business off the ground or take it to the next level. Their question is: How do I get access to funds for my business? In this article, I will show you 5 practical ways to raise enough money to drive your startup to success.
Before we go further, it is important for you to know that a reliable source of funding is not a guarantee for business success. It takes various hard and soft skills to launch and run a successful business. Most of these skills are covered in the business basics section of this blog. Make sure you have what it takes before you think about how to get money and what to do with it.
Here are 5 practical ways to raise capital for your business startup:
1. Personal savings
This is by far the best way to raise money for your business. As an aspiring business owner, you should have a personal financial commitment to your business no matter how small. Without it, no one would take you seriously. Some of our Featured Entrepreneurs had this to say about raising money by themselves for their business.
I needed to raise a reasonable sum of money before I could approach anyone for funding. It doesn’t make sense to approach people to fund your business when you have nothing on your own – Eze Chijioke (CEO GoodDay Paper Mills Ltd. Read full interview here)
I borrowed N5000 from a friend, which I invested in supplying Cowbell milk from Obiaruku to Abraka in Delta state. After two months, I was able to pay off the N5000 loan and had N10, 000 to deposit with the printer for the magazine. My parents supported me with N20, 000 and I raised the other N10, 000 from the magazine launch in January 2004. We sold the magazine and reinvested proceeds in the business – Oghenefego Ofili (Creative Director at Teo-Inspiro International Ltd. Read full interview here)
I started off on my own by rendering freelance services to professionals (Architects and Engineers) and acting as middle-man to clients and workmen (artisans). It was the money I was able to save up during this period that enabled me to register and start running my company – Daniel Imafidon Emmanuel (CEO of Daniesk Project & Services Ltd. Read full interview here)
There are several ways to raise personal savings. If you have a job, you should keep aside some of your salary towards realizing your business goals. If you are unemployed, find some services you can give to people in exchange for money. Do not be afraid to get your hands dirty, you are building something! Save the money you get until it is reasonable enough for you to approach other people for funds.
2. Family and friends
This is the second best and easiest means of capital sourcing for a business. When you do this, like I said in the first point, make sure you have some personal savings so that people would know you are serious. Nobody will invest in you if you don’t invest in yourself. The rest is simply common sense. For example, if you need to raise 20,000 naira, instead of asking one person, ask 10 friends and relatives to give you 2,000 naira each. if you don’t have 10 people who can give you 2k each, you are probably not making the right friends (relatively speaking, of course).
3. Angel investors
An angel investor or angel (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity – Wikipedia
There are lots of business people around who are willing to give funding for startups if you are willing to part with some equity. Here are 5 best places to locate angel investors for your startup funding. What you need to do is find them and send them a business proposal about your business, what you need from them and what they get in return. If they like it, they would need to see a detailed business plan showing the overall long-term feasibility of the business.
- Read also: How to write a business proposal that gets you a win 10/10
- Read also: How to create a business plan that attracts investors and maximizes your business potentials
4. Bank loans and micro financing
I do not recommend this, especially when you need money to start a business. Banks would be more willing to lend you money if you could show that you have started the business and that it is feasible.
You would be required to meet some stipulations which often includes providing some collateral and getting guarantors. Some micro finance banks do not need collateral but there would be other conditions you have to meet. If this option works for you, by all means go for it. Of course, you would need to show a detailed business plan for the business.
5. Small business grants
This is a type of fund given by government or some other organization to empower small businesses and entrepreneurs. Examples of some organizations providing funding for startups include: the Tony Elumelu Entrepreneurship Programme (TEEP), the Africa’s Young Entrepreneurs Empowerment Nigeria (AYEEN), the Dangote Foundation and a host of many others. For many of these organizations you have to show a strong desire to succeed, a passion for entrepreneurship and a willingness to help others.
There you have it. Succeeding in business takes work, patience, determination and of course, money. This article, hopefully, has taken care of the money side. The rest is up to you. I’d like to hear your questions and contributions in the comments box or on our Facebook page.
Whatever you do, prosper!