5 Ways To Finance Your Small Business
Small business finance is a major challenge in Nigeria and many other countries. Getting access to the right resources to start and grow a successful business always poses a daunting task to new and existing entrepreneurs. With little to no startup funds for many business owners to work with, scaling up a business to both profitability and real success, can most times lead to frustration.
How then do potential and existing entrepreneurs gain access to small business finance?
While there are more ways to finance a small business, here are 5 ways to gain access to small business finance to start, run, & grow a successful business:
1). Get A Bank Loan:
Banks are sometimes willing to give out loans, if you fully meet their criteria. The general perception of banks refusing loans to small business owners, is majorly tied to the fact that those entrepreneurs have fallen short of some major loan requirements.
Visit the local banks in your country, and confirm what it would really take to secure a bank loan for your small business. If after this inquiry, you realise you still might not qualify for a loan, you can then try other ways to gain access to your small business finance. You could also contact a financing company such as quickfee, especially if you own a legal or an accounting practise.
2). Find An Angel Investor:
Angel investors are individuals that put their money into young businesses that haven’t had any access to real startup capital. They’re usually among the first group of investors.
If your small business idea has a real need, and will also solve real problems people face everyday, there’s a good chance an angel investor could take a bet on your business.
When pitching to angel investors, let them know how the business already solves problems for a small number of people, the potential size of the untapped market that’s unconsciously looking for your solution, and how the investor as an individual, has inspired you through his/her business journey, to come up with this ground breaking business idea.
But most importantly, appeal to their self-interest, and not to their mercy or gratitude. People act faster if there’s a good chance they stand to benefit a lot from whatever is presented to them.
3). Raise Money From Family & Friends:
This is mostly your best bet to get a small business loan, when you’re just starting out. The reason friends & family might put their funds into your business is because of the emotional connection and the fact that they believe more in you, than the business.
Talk to a few friends & family members. The goal shouldn’t be to get one lump sum from one of them. Rather, strive to get very small sums from a couple, to eventually make up a reasonable small business capital.
As you start up your business this way, how well it scales, will determine if you might be able to secure further funding from an investor or a financial institution.
The rise of micro-finance banks in Nigeria, has led to the emergence of credit cards and micro loans. There are also a few companies like Renmoney in Nigeria, who give out micro-loans to business owners within a very short period without collateral. It’s important to consider the cost of credit, particularly when buying an expensive vehicle such as a caravan.
These micro-credit institutions, and credit cards, can be a good way to grow your business faster.
5). Win A Competition:
When different small businesses compete for a star prize (usually an investment from the organising body), the winner doesn’t just get money to run their business. They also get mentorship and nationwide exposure, which puts the spotlight on them, and gets them right in front of a lot of potential investors.
Winning a competition automatically throws up your small business’s chance of getting an investment by at least 400%. The reputation of the organising body also matters a lot in building the investors trust.
While only the winner gets the cash prize and mentorship opportunity, the other participants also enjoy some form of exposure. Their small businesses too, get noticed.
What are your thoughts on small business finance for entrepreneurs? Please leave a comment below.
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