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According to a recent study, over 94% of new businesses fail during the first year of operation. Lack of funding turns out to be one of the common reasons for this failure as money is the bloodline of any business.
Funding a business can be challenging especially if you don’t have enough savings or family money. Due to a lack of funds, many good business ideas could not reach the point of execution.
However, discussed below are different ways to get funds for your Business:
- Bootstrapping:
When first getting started, many entrepreneurs use “bootstrapping,” which means financing their company by scraping together any personal funds they can find. This typically includes your savings account, credit cards, and any home equity lines you may have.
In many cases, using the money you have instead of borrowing is a great approach—in fact, some entrepreneurs continue to bootstrap until their business is profitable. This can be beneficial because it means you won’t have extensive loans and monthly payments that bog you down, especially if you run into snags along the way.
- Family And Friends:
If you don’t have savings to start your business or you have exhausted your savings, the next set of people to consider is family and friends. However, they have to trust and believe in your capacity before you get cash out from them.
Most times, when family and friends give you money, they are investing in you not necessarily in the business. However, you still have to go about it the right way. Draw a business plan and be upfront with them. It is good to let them understand the business venture and any challenges that may come up. Also, specify whether you are taking their money to return it (debt financing) or you are going to give them a stake in the business (equity financing). They have the right to know when to expect their money back or returns on investment. Either way, whatever you do, don’t betray their trust. If things go south, communicate it to them immediately.
- Crowdfunding:
Crowdfunding is one of the new ways of funding a startup that has been gaining a lot of popularity lately. It’s like taking a loan, pre-order, contribution, or investment from more than one person at the same time.
This is how crowdfunding works – An entrepreneur will put up a detailed description of his business on a crowdfunding platform. He will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc., and then consumers can read about the business and give money if they like the idea. Those giving money will then make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.
The best thing about crowdfunding is that it can also generate interest because it helps in marketing the product alongside financing it.
- Angel Investment:
Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital.
Angel investors have helped to start up many prominent companies, including Google, Yahoo, and Alibaba. This alternative form of investing generally occurs in a company’s early stages of growth, with investors expecting up to 30% equity. They prefer to take more risks in investment for higher returns.
- Small Business Funding Through Grants:
Nowadays, there are several grant platforms available for small business owners to explore. In fact, there’s hardly a year without a grant for grabs. A business owner must therefore be on the lookout for available grant opportunities. To get a grant, you must have a concrete business plan, a registered business, a good financial projection, and a mind-blowing pitch in place as this will prepare you ahead of time. If possible, get your business registered with the relevant bodies as this is sometimes, a requirement. You can visit our website @ www.thewcommunity.com to apply for our Womenpreneur Pitch-A-Ton Africa (season 3) and stand the chance of winning a Five Million Naira (#5 million) grant alongside other benefits.
- Bank Loans:
This means of business funding has been in existence since time immemorial and is the first go-to place for most businesses when seeking funding. To facilitate a bank loan, you should have been engaged with the financial institution in the past, not necessarily for a loan but for other banking services like savings or current account operation. Over time, the bank will become familiar with you as an entrepreneur and also with your business. You can then be in a position to seek additional banking support like loans and overdrafts.
To secure a loan, a commercial bank will require your financial information as a person and as a business. Also, they will require collateral from you to guarantee and secure the loan.
Other ways of funding a business include Product Pre-sale, Venture Capital, Small Business Funding With A Well Paying Job, and many more.
