Every business needs funds to survive, it is the live wire of any business whether such business is a start-up, an already existing small business or a medium scale enterprise.
The injection of funds into any business ensures that the business runs smoothly. Funds come in handy in the purchase of raw material, specialized equipment for the execution of specific processes, manufacture of products, or in the delivery of services in the course of business operations.
It is also important for the successful implementation of marketing strategies. This implies that without funds, a business may not be able to scale up and increase profitability.
Hence, it is necessary for every intending entrepreneur to know how to access this much-needed lifeline in order to maximize the benefits of the business.
Types of Funding Available to an Intending Entrepreneur
There are different options open to an entrepreneur for business. Choosing the right one for your business will make a whole lot of difference and determine if the business will succeed. The types of funding available to entrepreneurs include
Personal Investment
A loan from Friends and Family
Bank Loan
Grants
Crowdfunding
1. Personal Investment (Equity)
These are funds that are pushed into a business by the business owner. It is usually obtained from the savings of the business owner and carries no interest at all. This allows the business owner to focus on building the business. So many entrepreneurs started out using this funding as it eliminates.
However, it may not be enough to pull the business through rough patches thus forcing the business owner to look for alternatives.
2. A loan from Friends and Family
Your family and friends will always have your back and stand by you. A loan from a family member will enable you to find your footing without having o break a sweat in the journey into business. The benefits of taking a loan from friends and family include
i. It removes the weight of interests that would have accrued on the principal sum.
ii. It eliminates the pressure of having to meet strict deadlines that come with most bank loans.
iii. It is usually flexible and more time could be arranged for repayment leaving room for healthy business growth.
3. Bank Loan
This is usually accessed from the bank and it comes with interest. Most banks give single-digit interest loans while only a few have zero interest loans.
Zero-interest loans are designed for small scale businesses and come with very short loan tenor. That is, they do not have long repayment duration, the range is between 3-6 months.
And it targets female entrepreneurs who are into small scale business and petty trading.
FCMB SheVentures and
TraderMoni are good examples of zero-interest loans.
Generally, bank loan puts a lot of pressure on entrepreneurs as they have to make repayments as agreed with the bank. This pressure should be kept in mind when opting for this source of funding.
4. Grants
Grants are usually monies that you receive upon applying for it. It comes with no obligation to pay back. You only have to meet the requirements of the giving agency or organization.
This makes it "free money". Grants are usually more difficult to get as they are competitive in nature. They come with laid down requirements that must be met for you to be considered eligible to apply.
Due to the competitive nature of grants, many entrepreneurs have been scammed while trying to get one. Check with reliable sources like government agencies or private partners that actually give out grants.
5. Crowdfunding
This is a type of funding that requires that you tell people about your business and the amount you need to start the business ask for help. These people are expected to each give you a particular amount which when put together would help the take-off of the announced business.
This is usually done online. Businesses can leverage this means to get fund and it can be utilized by both small and well-established businesses.
On the flip side, if at the end of the time frame for collection, if the amount you get is less than what is stated as the amount needed, you would have to return the money to the individual donors.
Before you use this method, do proper research on your state/country's policy on crowdfunding.
Whatever choices you make as an entrepreneur, make them only when you have done your research to know what option is best for your business model.
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