Raising capital for your small business:
This article will show you 8 reliable and effective ways to raise the capital you need to start and grow your small business.
Starting a business, as we have mentioned in our previous posts require idea, plan and execution. With your idea and plan on ground, execution may not be possible without the needed capital.
If you ask aspiring entrepreneurs why they haven’t started their business yet, almost all of them will tell you they do not have the capital to start. Finding fund for business is a major challenge faced by startups in their entrepreneurial journey.
Here are ways to raise capital for your business:
1. Save some money
Succeeding in business requires being able to save. An entrepreneur who does not save will definitely fail woefully at doing business. Even if he had the capital, it would only take a short while before he squandered his business to closure.
Saving works best for people who already have a means of income, no matter how little. If you have a great idea of a product or service, gradually putting aside some money to help in execution, is a sure way to raise the initial capital.
To do this, estimate how much it would cost to start your business and then spread that amount into months or weeks, depending on how much you earn. Then discipline yourself to save gradually until you have the capital you need.
Let’s say you needed N100,000 to start, you can decide to save N8,500 monthly and by the end of twelve months, you would have saved N102,000.
The good thing about saving is that it helps you attract more capital. It will be easier to convince other people to support in starting your business, if they know you’ve been able to raise some money yourself.
So when next you get your salary, wage or pocket money, always remember to set something aside.
2. Use your assets
Your asset is anything of value that you own. There must be things that you own, but don’t necessarily need, that are of high value. Examples include highly expensive phones and gadgets, clothes, jewelries, electronic appliances etc.
Selling off those things you can do without can help you raise capital for your small business.
For instance, a lady I know finished makeover training, but didn’t have money to buy the equipment she needed for a start. Having two smartphones, she sold out one on OLX for N60,000 and that was more than she needed to buy the basic things for her new business.
I believe no property is worth more than a good idea. If you have a good business idea and need capital to push it through, selling off something you don’t need may be all you’d have to do to raise the capital you need.
But if this doesn’t sound like what you would want to do, read on for other ways on raising capital for your small business.
3. Talk to family and friends
When it comes to starting a small business, do not underestimate the importance of family and friends. These are people who already love and care about you. They also want you to succeed. And good enough, you’re free with them and can also influence them. Again, once your business is up and running they will likely make up the first set of persons to patronize you.
Since your family and friends are emotionally attached to you, they are more likely to take the risk and invest in your small business, than other people would. Most big businesses you know today, started with little borrowing from family and friends.
4. Get your customer to pay in advance
I bet you didn’t know you can raise capital by getting your customers to pay in advance for a product and service. This usually works well for businesses that do not require huge initial expenditure.
Here is a typical example. A friend of mine, after completing his training in web designs, got a job to design an ecommerce website that would cost N150,000. He was able to convince his client to make an up-front payment of N80,000. From the advance paid him, he bought the things he needed, which included a laptop and an internet dongle.
Those were the basic things he needed for his home office. Today that business has grown to become a reputable web design agency, with at least five staff members.
Getting payment for a work not yet done can be a source of capital for your small business.
5. Find a partner
You may have that great idea of a product or service, but not enough cash to get the business going? Finding a partner can be the best thing for you.
A partnership is formed when two or more people (up to 20) go into business together. Many businesses have been formed with people coming together to share the cost, profit and even ownership of the business.
It requires everyone to bring something to the table. Partnership is always a win-win thing for all parties.
6. Talk to an angel investor
An angel investor is that person with lots of cash and is willing to invest in your business in exchange for a percentage of your profit.
When thinking about raising capital for your small business, consider looking towards wealthy individuals in your community. Where you do not know the person directly, have someone who knows them to introduce you.
Just to keep you informed, the major pitfall with this method is that angel investors may likely ask for high stake in your business to make up for the risk of investing in your new and unproven idea; But if you find an investor who is not asking for too much, then you’re good to go.
7. Apply for loans and grants
Grants and loans are not the same thing. Grants do not attract interests and are not repaid, but loans attract interest and you’re expected to pay back.
Applying for loans and grants for your small business may seem the most tedious thing to do, but I tell you, it is not as difficult as it seems. Why?
Many government agencies and international bodies are interested in helping small and medium enterprises (SMEs) get started, because of their contributions in boosting the economy of a country. For instance, small businesses provide employment, thereby reducing crime and helps in the development of local technology etc.
You may not know it, there may be loans and grants available for small businesses in your country, through various government and agents and international bodies. So why not take advantage of it today.
All it requires is researching to know what is available and following the necessary guidelines.
8. Maybe you should talk to your bank
I decided to put this last because our banks today don’t like to play with small businesses, because of the high risk involved. They would rather offer loan to established companies, who are already in business making profit; that they know can pay back.
You should only consider approaching your bank when other seven steps in this post have proved abortive. Approaching your bank for small loan, you need to prove that you will be able to pay back. However, you may consider talking to your accounting officer on how to go about finding loan for a business like yours.
With these eight methods of raising capital for your small business, we can’t wait to hear your success story very soon. If you have question and contribution, or any other way to raise capital for small business, add it by filling the comment form below.
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Raising capital for your small business: