It is not by happenstance that this article will be my first on FOWOSERE. But of course it should come first because there is no way you can start a business with nothing at all. Even if your business is service based, you would need to invest in form of transport fare, rent, business card, airtime and so on. As a matter of fact, the time and energy you spend starting a business are investments of some sort. No matter the scale of your business (large scale, medium scale and large scale) you would always need to few cash to start with, no matter how small.
However, not everyone needs all kinds of loan. Some types of loan as better for some kinds of business. Some businesses are capital intensive and hence they might have to combine 2 or 3 sources of capital.
Listed below are some traditional ways you can get capital for your business. I will write a separate article about some nontraditional methods of raising capital.
1. Personal Savings
This is the first and most important source of income every startup should have. It is first because nobody can understand your business before you. It is the most important because nobody should be willing to invest in your business if you have not invest a dime yourself. Investing a lot of your personal savings into your business shows other investors that you are really very serious about it. If you have given all your cash to the business, you yourself won’t want it to fail since you money is at stake.
So if you are going to start a business soon and you don’t have any savings at all, you should start saving now!
2. Friends and Relations
The easiest people to sell your business idea to are your friends and families. As long as you have a great idea they will be more than willing to render financial help.
In addition to having a great business idea and plan, you should have a great communication skill too. If anyone is going to be willing to give you cash for your business, you have to first convince them that you know what you are doing and that their money would not be wasted. The lovely thing about cash from Friends and Relations is that it comes with either low interest rate or none at all. Some family members and friends may not even require their cash back.
3. Bank Loan
This is another source of capital that many business owners take advantage of. However, I would prefer that you take your mind off a Bank loan for now. If your business is just starting, getting a bank loan might be difficult. These days, a lot of banks have become more conservative with their cash. They take so many things into consideration before they approve any bank loan. However, if you have to take a bank loan, you have to have a proper business plan. You have to show exactly how you will spend every bit of your capital and everything you would do in the business that will bring back enough profit to pay back your loan (with interest) and still have enough money to continue business.
4. Venture capitalists
These are individuals who have spare cash to invest and always want something in return. Different venture capitalists need different things in return. Some might want a percentage of your company. Some will give you as a loan and require you to pay back with interest in, say three years. Some others will give you the loan and tell you that they are entitled to some percentage of your profit for a period of time.
Whatever the case might be, be sure to understand the agreement properly before signing any document.
The only disadvantage to this is that some venture capitalists may require a degree of control over your business.
5. Angel investors
Unlike the Venture capitalists, Angel investors would most likely not require any form of interest or return on the cash they are willing to give you for the business. Angel investors are just wealthy philanthropist who just derive pleasure in helping others without requiring any kind of gain. Your communication skill in this case is also very useful, because this type of investors may not require interest in return, but they want to see that they are really helping someone and not just wasting their money random fantasies called business idea. The best way to treat angel investors is to honor them in every way possible.
Cooperative are fast becoming a major source of money to many Africans today. The way a cooperative is run is very flexible and comfortable. There are many types of cooperative you can join as a business man, you just have to choose the one that suits your need and that of your business well. If you want to join any cooperative, the first thing to make sure is that it is registered. It is very dangerous to rely on a cooperative that is not registered.
Whichever cooperative you belong, there is a particular amount of money you should contribute into the system monthly. Some cooperatives are for a particular profession or business line.
For example, some farmers can come together to form and register a cooperative. Apart from the normal lending that cooperative do, such cooperatives could receive grants from government and other organizations that is interested in what they do.
Whichever source you are going to seek cash from, just make sure you are focused enough. Many people run into debt because they are not diligent enough to start and sustain a business.
As a result, so many investors are skeptic about giving anyone their money. This makes it generally difficult for businesses to access funding.
Use any of the funding options above to raise capital for your business and generate enough money to establish your business.