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.Â
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 starting out, many entrepreneurs turn to “bootstrapping,” which involves financing their company with personal funds. This often includes savings accounts, credit cards, and home equity lines.
Using your own money instead of borrowing can be a smart strategy. In fact, some entrepreneurs continue to bootstrap until their business becomes profitable. This approach can be advantageous, as it helps you avoid extensive loans and monthly payments that could weigh you down, especially if you encounter challenges along the way.
- Family And Friends:
If you don’t have savings to start your business or have exhausted your funds, consider reaching out to family and friends. However, it’s essential that they trust and believe in your abilities before you ask for financial support.
When family and friends provide you with financial support, they are often investing in you rather than just the business. It’s important to approach this responsibly. Start by creating a solid business plan and be transparent with them about your venture, including any potential challenges. Clarify whether you are seeking their funds as a loan (debt financing) or in exchange for a share of the business (equity financing). They deserve to know when to expect repayment or returns on their investment. Above all, maintain their trust; if things don’t go as planned, communicate with them right away.
- Crowdfunding:
Crowdfunding is a popular new method for funding startups. It involves collecting loans, pre-orders, contributions, or investments from multiple individuals simultaneously
Crowdfunding allows entrepreneurs to present a detailed description of their business on a crowdfunding platform. They outline their goals, profit plans, the amount of funding needed, and the reasons for the request. Consumers can then review this information and choose to contribute if they find the idea compelling. Contributors can make online pledges, either as pre-purchases of the product or as donations. Anyone can support a business they believe in.
One of the greatest advantages of crowdfunding is that it not only raises funds but also generates interest, effectively marketing the product while securing financing.
- 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 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 is 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 also apply for our Womenpreneur Pitch-A-Ton Africa and stand the chance of winning a 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.
