When it comes to business ventures, the common saying,” put your eggs in one basket” is not what you want to embrace. Diversification enables your business to deal with bad financial spells easily. Even better, it enables you to get the appropriate financing to meet your needs. Worth noting is that bankers do not see themselves as your go to destination when a financial need arises.
As an entrepreneur, showing that you have other sources of finance increases chances of meeting your needs. To get the wind of your business out there, have social media presence, therefore, buy Facebook followers. This is what being a proactive entrepreneur entails. Even so, it’s important to know that whichever source of financing you choose there are accompanying merits and demerits. Here are some sources of finance for entrepreneurs
The government provides sources of financing to business. This includes grants and subsidies. Even so, you should note that getting the grants and subsidies involve very stringent and competitive criteria. In most cases, the government requires you to match the amount you are being given though this amount varies depending on the body that grants it. For instance a research grant may require you to get only 40% of the total cost while a business grant may require you to get 50% of the total cost. Before receiving the grant, you are expected to provide the following
- A detailed project description. This includes the name of the project, the type of activities it does, and where it will find clients or suppliers. The description should be precise and on point.
- Explanation of the benefits of the projects. The government only invest in projects which are beneficial to the community. You should try as much as you can to have the reasons behind the business enumerated.
2. Bank Loans
These are the most common source of funds for small businesses and medium enterprises. Different banks have different types of packages for these funds. For instance, some banks offer personalized service or even customized payment. Before choosing the type of bank to get this from, go around and see the available options. This will help you find the bank that meets your needs. Moreover, bankers look for entrepreneurs with vision and passion.
A good idea is not enough to help you secure a bank loan. You must show that you have passion and that you really want to change people’s lives. Moreover, BDC offers startup financing to entrepreneurs in the startup phase. In most cases, this usually lasts for 12 months.
3. Venture capital
Before diving into this, it’s important to keep in mind that this isn’t for all entrepreneurs. From the beginning, know that venture capitalists are mostly looking for business that is technologically driven. Moreover, the companies must have high growth potential in sectors of information technology, communication and biotechnology.
In most cases, venture capitalists only come in to help carry out the very risk through promising businesses. To help in this, they take part in the equity of the business. Keep in mind that this involves giving some equities to a third party. Some successful entrepreneurs say that you should not take too much capital from the venture capitalists as they make you to lose control of the business. What you want to do is to look for investors with relevant skills and expertise in your area of operation. Example of venture capitalists includes BDC. They focus on helping the business or company during major financial commitments
Have you ever heard of Angel investors? Now these are groups of wealthy individuals who contribute a pool of funds and invest in small firms owned by others. They are mainly former CEOs of big companies who have acquired a range of skills in business management. They not only contribute funds but also skills and expertise. Normally, they finance businesses in orders such as $25000 to $100000. What do they need in return because nobody can invest large amount of money without expectation. They only need the right to supervise how the company is being managed. They need to be part of the board of directors and transparency from the management team. It’s not easy to find them though as they keep very low profiles. You have to contact specialized associations or go to their website.
5. Personal investment
Who should be the first investor in a business? Now leader’s role model the way. As an entrepreneur therefore, you are the first investor in the business. Using either your cash or collateral security, show the world that you really value the business. Moreover, if you invest in the business, you will find it easy to seek donations from family and friends. Or how can we know that you have a long term commitment to your goal? It’s only through sacrifices and commitment. Personal investment is one of such sacrifices. Having personal investment allows you to have ownership thus drives you to have return on the amount invested.
6.Donations from family and friends
Family and friends provide funds to entrepreneurs in different forms. Some lend money to the entrepreneur, some through hybrid where they pay a percentage of your sales. This type of funding is very important because unlike strangers, they trust you and know your potential. You therefore need not work your but off to convince them. The caveat is this though. Such deals or helps may ruin your relationship. Some relationships have been ruined with as little as 30 shillings. Therefore, ask yourself what you would do in case you lose that money, because, come to think of it; is your relationship worth 30 shillings? Have plans of how to pay back loans from family so that you may not end up in the rat of avoiding them.
What is holding you back from becoming an entrepreneur? Is it fear of failure, is lack of finance, is it the requisite skills? Step up, your dream is on the other side of fear. The first step is to take a step of courage and start. The rest will follow. Out of the blues, investors will come knocking at your door. Wait no more. Start today.