7 Ways to Finance Your Business Idea
business funding opportunities for startups and small businesses
You have a feasible idea, you have concluded all analysis to help you validate this business idea. Everything looks good. Now, you are at a point where you need to execute your idea to begin running a business. The big issue; how do you fund this valid idea? No doubt you need some good amount of cash to make this happen.
All of this, before you begin to think about making profits. Business funding for a startup is one major challenge entrepreneurs face. We are going to outline funding options that are open to you to help fund your big idea and bring it to fruition.
Bootstrapping
Bootstrapping is usually your first resort. You do all you can with your personal savings and income. Some entrepreneurs run their business this way for a long time until they achieve a measure of stability in their business.
With bootstrapping, you don’t get saddled with making monthly payments to repay a loan. However, external funding can help you expand your business faster and reach your business milestones much quicker.
Sometimes in the cause of bootstrapping, funds may run out. Lack of sufficient funds is one major reason startups fail. Here are other ways to find funding.
Small business loan
A small business loan offers you the capital to invest it into your business. Government loan schemes, banks, fintech, and online lending platforms offer these kinds of loans. While some may need some form of collateral, others may not need any collateral. Loans always attract an interest rate which may vary.
SpottR offers small business loans and trade credits to assist small business owners. Interest rates are small and designed to encourage business growth. So, even while businesses offset a debt they can still enjoy a positive level of cash flow.
Crowdfunding
Raising money from a large number of people on online platforms is becoming common practice. These platforms help you raise money from individuals across the web. You will need to set up a campaign and mention a target amount of money you need to raise.
In doing that, you will pitch your business idea and outline specifically what you will use the funding for. If you are engaging on an investment-based crowdfunding site, you will need to specify what your investors stand to gain.
It could be a percentage interest on money they invest in or an equity option. Some crowdfunding that is not investment-based helps you get funding for your business without asking back anything in return. There are several crowdfunding sites in Nigeria. Circle up is one of them.
Angel investors
There are well-off business professionals and individuals with high net worth looking to invest in startups in exchange for some ownership equity. When an angel investor funds your venture, s/he owns part of the company and becomes part of the decision-makers in the firm. You can find angel investors on social media forums, religious and social organizations, including networks dedicated to finding angel investors like (AAN) African angels network, Lagos angel network.
Venture capital
A type of financing that investors provide to small businesses believed to have long-term growth potential. This money doesn’t come from an individual like the case of angel investors.
This money is from investment companies, large corporations, and pension funds. Investors may also want to get equity in the company, which can be a disadvantage.
However, VC is a good option if your venture does not have access to the capital market. Growth Capital Funds is an examples of a VC forum to connect with VC investors.
Angel Investors are a good option if you are not looking for a large sum of money and if your business is still new. VC is a better option if you are an established business and looking to expand. This may require more money which angel investors may not be willing to risk.
VCs tend to invest more money than angel investors. Many angel investors help to mentor and nurture small businesses. While both desire equity gains, they offer the help your business needs in different capacities.
Family and friends
Family and friends are familiar places to turn to when you are just beginning. Your immediate circle may have funds to spare and invest in your business idea. Sometimes they can even be a source of angel investors.
It’s a good idea to clarify their giving intentions. Are they making you a nonrefundable contribution? It means the money is a gift from them to you. Or do they expect repayment with or without interest? It’s also important to discuss all the risks involved.
Business grants
This kind of financial aid can be gotten from the government, private organisations. The money is yours to keep and doesn’t need to be paid back. However, if you fail to use the money for the true purpose, you will need to pay it back.
You also need to adhere to the rules on how to spend the money you receive. additionally, you must be ready to meet the funder’s accounting and reporting guidelines. Tony Elumelu Foundation is an example of an organisation that offers business grants. To get business grants, you need to apply for them.
It’s a lot of work trying to get funding for your business, but that’s what comes with owning a business. With a well-thought-out business plan and great pitch, you can get people to invest in your business idea.
