Coming up with a business idea is relatively easy, the difficult aspect of any new business is usually the acquisition of the necessary capital needed to execute the brilliant business idea. Without thorough research as to how to raise capital for one’s business, it is quite easy to go in the wrong direction which of course will yield no result or unnecessary debts.
There are so many options available to you for securing funds for your business asides the widely known “loan from bank”. It is easier to raise funds in this modern day than how difficult it was before and now we will be enlightening you on seven ways you can raise capital for your business.
- Personal Funding
A business man once said “you have to put in money to gain more money“. In the conception stage of a business, an entrepreneur may decide to use his/her money to fund the business. Experienced entrepreneurs usually engage in this method as it is taken as a sign of seriousness to future investors. Funding your own business is seen as a bold statement that one has faith in the business and willing to put your hard earned money at stake to prove how much you believe in your business venture.
Personal funding has an edge over all other methods of raising capital except for crowd funding which we will be addressing next. With personal funding, the entrepreneur has control over the business and calls the shots.
- Crowd Funding
It involves two types which are rewards and equity based funding. It is solely left for the entrepreneur to decide on which best works for the business. Crowd funding is the best method for startups with artistic ideas to raise funds and it is used for financing new and mega technologies.
Choosing any of the crowd funding options involves minimal risk as one showcases his/her project to the market in order to raise funds. This showcasing is of an advantage as investors take note of such projects and when it is brought to an investor’s notice that there are other consumers willing to invest in your product, they are persuaded to also invest. Crowd funding with rewards helps the startup to maintain control over the business. It will surprise you to note that a lot of startups make use of crowd funding to have a sense of freedom and avoid being censored.
- Angel Investors
This method came to the limelight thanks to a show on the popular ABC channel called “SharkTank”. Angel investors are persons who asides from providing the necessary capital for a business startup, also act as mentors based on the experience they have gathered over the years. Angel investors usually donate a sum amounting to a million naira or in some cases, investors come together to provide the needed fund.
Networking is the best way to reach out to these investors and this can only be done when they are engaged on social media platforms such as LinkedIn or via blog posts on websites. Reviews and honest feed-backs gotten from people you talk to about your idea will put you on the right track with your product. People will only be interested in what you have to offer when they are enlightened about your idea.
Seeking Angel investors is indeed a good idea but like the VC of a school, they may want more than just an instant investment return but managerial control of your business. The things to look out for when seeking Angel investors are those who have better experience in your target market or have something different to offer that is absent in your team. Investors surely want to see your business succeed as they have invested their money in you.
- Friends and Family
When there is love and understanding, friends and family are ever willing to support you as they know what you are capable of achieving and how far you would go to get a good job done. While raising capital from family and friends may be the best option as they are aware of your potentials, Angel investors will be the best method for expert advice and guidelines since family and friends may not be well-grounded in some areas. The best way of raising capital from family and friends might be choosing those with expertise in business and the path to take while investing the money; else if the business doesn’t do so well, your relationship with the person may likely be disrupted forever.
When dealing with friends and family, act as the professional and enlighten them on all risks involved in the investment as they make up their minds.
- Get a Loan
This is the most common method involved in the process of funding a startup business. Through this method, the control of the business remains in the hands of the business owner. The risk of taking a loan from the bank is particularly healthy for those who are confident that the business will prosper in recorded time without problems. It solely depends on you and the sort of market you have decided to start up.
Before going ahead to take a loan, the interest rate should be considered, and collateral to be given to the bank should be checked. Make sure you can comply with all terms and conditions involved in taking a loan.
CHECK OUT THIS 9 THINGS YOU MUST KNOW BEFORE STARTING A BUSINESS IN NIGERIA
It is advised that you only go in for competitions when you are certain that your idea is capable enough. Some of these competitions are Sterling Bank Pitch Nigeria, Pitched Global, TEF, Co-creation Hub etc (we will give you a more comprehensive list of startups competition and how to apply for them). These competitions helps with not only the publicity aspect of your business but if crowned the winner, a huge capital will be given to start up your business while consumers await the unveiling of your product in the market.
The risk involved is small, because if you win you will have gotten cool cash for your business and also showcase your idea to potential investors or in a situation whereby you do not win, embarking on the competition already serves as an advert for you to potential investors as they may also contact you in order to invest in what you have to offer. It is a win-win situation.
- Venture Capital
Another good way to raise funds for your business is venture capital. In this method, the venture capitalist rarely invests in start ups but invest in an already growing market and new innovations. Although not all venture capitalist invests in young businesses, some would prefer the business was already running before investing in it. The minimum amount they invest with is a million dollars, cool cash right?
In conclusion, there are various methods available to raise capital for a start up business and all that is needed for you to do is to thoroughly go through all the methods and select whichever one that is best for not just you but for your business. One thing to have in mind is that, gaining funding is not an easy process and success is not guaranteed at the onset but keeping an open mind and examining each level of progress will help you succeed and become a world renowned entrepreneur.
You can check out this 10 Reasons Why You Should Start Your Own Small Business Now
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