Five Ways To Get Funding For Your Business
One of the challenges inherent in starting a new business unarguably is getting funding for the business.
Conceiving a business idea could be tricky and tasking, requiring creativity and special nous to stand out in what is already an overcrowded market. However, the process of considering feasible ways to get funding for your business could be one different kind of tricky.
Let’s face it, before considering going into a business, you must realize the potential financial requirement. You might have some savings at least to cover the initial necessary costs, like building a website, renting a location or office space, hiring a tech team or offsetting other ineluctable costs, however, if progress is going to be made in the business, you will need further financial outlay to drive the business to more enviable heights.
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There are several ways to get funding for your business ranging from investors, to personal savings, family members and bank loans. However, these opportunities come loaded with their individual pros and cons and an ingenious entrepreneur will do well to consider all his options carefully while weighing existing alternatives before deciding on which platform to pitch his tent.
If you are having a hard time determining how you could get funding for your business, here are five practical suggestions to help you.
When making a decision about viable options to get funding for your business during its initial stages, you do not have to go too far away from home, the first option is to consider bootstrapping. By bootstrapping, I do not literally mean getting some fancy boots and strapping them on – not like that would be a terrible idea altogether.
Bootstrapping involves using your own financial resources, such as money you have saved up over the years. You might not have the capacity to fund a high-flying venture at first, but then, you can not jump onto the wagon of business owners while having nothing in hand.
You know one advantage of using the money you have instead of borrowing, which by the way many entrepreneurs continue to adopt until they have a profitable business? It is the knowledge that you won’t have humongous loans and monthly payments that are bound to weigh you down, especially if you run into hitches – which is most likely – along the way.
However, it might become imperative to bring in outside sources of funding if you’re looking to grow your business rapidly or when you eventually run out of personal funds. This, of course, depends on the kind of business project you are running. In this kind of situation, you can consider the following external funding sources.
2.Family And Friends
This, here, is another means to get funding for your business. I know a couple of you would sneer at the prospects of acquiring funding from relatives due to its slightly volatile nature. That is why I’m suggesting proper appraisal of your options before diving into this.
First of all, when opening up to family members, either close or extended ones, about your need for their input in your business, you must tie up loose strings by clarifying every aspect of the deal. Let them understand the existence of chances the money wouldn’t be returned. Let them know the possible risks and rewards associated with the help they are rendering you.
They should also know that every business has an equal chance of not just surviving, but also being successful, as it has of failing. This is in other to stave off potential bickers that might ruin existing relationships if things don’t own out as blissful as expected.
3.Find A Partner
In considering how to get funding for your business, finding a partner with like mind and ambition could also prove immensely beneficial. The basic advantage of getting a partner is that inevitable costs and expenses accompanying the business will be shared, the same as the risk present in the business. A seeming downside to this option, though, is that it reduces, drastically, your autonomy over decisions associated with the business.
Interestingly, a partner’s role in a business may not actually translate to equal decision rights for him. He may or may not be an employee of the business. This, though, depends on the contract of partnership. Will he be a dormant/sleeping partner, a working partner or a nominal partner?
Will the business be known as a joint venture or limited partnership? All these are strategic decisions that must be made before designing a partnership contract.
4.Seek Bank Loans
Another way to get funding for your business also is to consider acquiring a bank loan. However, this is easier said than done, especially in the Nigerian scenery. Traditional banks, while making small business loans available, typically have a lengthy list of requirements to obtain the loan.
They might require you possess a good credit track record and will often demand collaterals before disbursing loans.
Bank loans are, as such, a tricky prospect, what with the high-interest rates and possible business intrusion. Some of the demands that might be made by a typical bank include collateral, business plan, your business’ financial details, audited/reviewed financial statement, insurance record and an agreement on future ratio.
Alternatively, you may opt for an online loan with an easy approval process. Many of these financial sources won’t tarnish your credit score so that you can use another loan for bigger matters
To know more about these individual requirements, read this article on 10 Things the Bank Will Ask When You Need a Business Loan.
To qualify for a bank loan, you must possess the “Five Cs” of credit banks look out for. They include -capacity, capital, collateral, character, and conditions. If your business lacks any of these, it might be really difficult to, obtain a small business loan.
5.Attract an Angel Investor
Another way to get funding for your business is to seek an angel investor. Angel investors, as the title suggests, are prosperous individuals willing to invest in businesses. An “angel” is a businessperson who provides financial assistance to businesses with signs of potential growth, usually with the expectation that they will partake in its financial rewards.
Ordinarily, angels are business-savvy individuals who bring relevant experience, acquired over a number of years, as well as valuable advice to help move the business forward. What this implies is that angels are less content with playing a backstage role in the running of a business. They always want to be at the epicenter of activities and take forerunning responsibilities.
To avoid a potential clash between you as a business owner and an angel investor, which is bound to have an overriding effect on the business, it is important you clarify upfront their nature of involvement in the business’ activities. Will they be consulted on all decisions or only decisions involving finances?
What about new employees, will they take an active role in the hiring process? How regularly would they get updated about the company’s progress? These and many others are pertinent to ensure a solid founder-investor relationship.
While there are many other ways to get funding for your business, these five mentioned are the basic.
You could consider bootstrapping, that is, using your personal finance. If that, as expected, doesn’t do it all, you could bring family and friends into the loop while making sure to enamor them about the potential risks associated with the business. You could also consider getting a partner to share the financial and mental demands of the business, however, any such partner must understand your vision for the business and share it.
Also, despite how stringent it may seem, banks provide an alternative means by which you could get funding for your business. However, you must be ready to dance to their tune.
And finally, angel investors are always ready to cover the financial outlay provided you can convince them of the benefits they are certain to yield from their goodwill.
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