So you have settled on a brilliant business idea and now you need money to start. How do you get past the funding stage? Knowing these 7 sure-funding styles to kick start your business would open your mind to a world of capital, which has been the missing piece for some in the entrepreneurial puzzle. It’s the AL Pacino in the Godfather story, such that every entrepreneur is fully convinced that all they need after an idea is funding. The importance is striking. But the absence can be rather devastating.
These funding styles could finally get that idea out of the basement to the top floor.
Many business owners give up in their fight to get funds for the business. Sadly, today’s world has shown that capital doesn’t just come in the shape of money, depending on how you look at it though. Relationships also start businesses in reference to Social Capital. You might not think so, but it doesn’t make it less of a fact that some businesses have been born out of friendships and trust. Knowing an individual who extends the relationship to lending you his truck for your logistics business, up until when you can start payment, is a great example of Social Capital.
A lot of details go to show that there is absolutely no one-way to do this. Businesses have over time gone to the moon and back to perfect a funding style that best suits their business model. And apparently, if you search hard enough for enough knowledge about this, then you would find a funding style tailor-made for your business. Though what worked for a certain firm might not work for you; so don’t give up just yet. These 7 funding styles might just be what you need.
7 Funding Styles To Start Your Business
Businesses need money for basically everything, from office space to working tools down to a management team or tech team, as the case may be. But whatever it is, some of the company’s requirements need to be paid for with money. Money, Money, Money, as much as you can’t let this reason stop you from dreaming; you still need it to survive. We have too often seen businesses in their early stages wind up due to this, or managers satisfying the office’s payroll with personal cash. I mean what happened to the fact that businesses are a separate entity? Most of these managers do all it takes to keep their “heads above water”. Funding your business has proven to be a big problem in both recent and old times. Thereby, making it the most asked question by entrepreneurs at business events or seminars. As there would never be enough cash for every business in the universe, the more you know about it betters your chances at survival.
But first you need to learn how to bootstrap.
1) Learn How To Bootstrap
Bootstrapping means funding your company by gathering every form of personal funds available to you.
You would be telling a great lie if you thought anyone would be willing to invest in your business when you haven’t. How much do you even believe in this idea of yours? It’s one thing to have a great business idea and it’s another to believe in it enough to use all you have first, before sourcing for external help.
In fact entrepreneurs are advised to take this first step in their funding approach. If you can risk 1million naira of your money in a business that probably nobody but you believe in, then you would go to any length to ensure you don’t loose it all. If eventually you do lose it all, you must have learnt enough about your business to then throw in someone else’s money. Some entrepreneur’s even bootstrap till the business starts making a profit. This limits the amount of external pay back they have to carry out. But if you come up with an idea and the first thing you do is take loans and borrow money, the pressure might be too much. And nobody wants to see a real life Acrimony movie. So learn to bootstrap first.
2) Family & Friends
These are the first sets of people that should believe in you enough to support you. If your friends & family cannot put something down to support you, then you need new ones. Yes! You do need a new set of people around you. Although, you have to be prepared with enough knowledge about your business or even a business plan if possible. Even though they are your friends & family it’s never a nice idea to lose money. So before you swallow your pride to ask for support, you must be ready so you don’t have to swallow your pride, twice.
This style of funding has yielded a lot of capital for start-ups, and I mean a lot. Angel investors are business professionals with high numbers in net worth, looking to invest in promising companies, and they invest from 500,000 naira to a million naira. Simply put, “Angels” are here to save entrepreneurs/businesses from funding issues.
They only invest when they are assured that your company would be a success. So yet again, you need to have an idea that is feasible. These can be found in networks as platforms that connect entrepreneurs to angel investors. Angel investors are a big deal, so it might take some time. However, this shouldn’t stop you from exploring other options.
As the term implies, crowdfunding entails donations or contributions from people or a group to assist a cause. In this context, crowd funding requires you to start a campaign and indicate a target amount of money needed; users also create some benefits for donors. A lot of crowdfunding platforms have been doing the most, assisting and supporting people’s needs. The campaigns are designed to last over a certain period of time. And as a result, some platforms don’t give you the money if you don’t meet your goal in the specified time. Others let you keep whatever you make for a certain cut of the proceeds. Click this link for more information on platforms for crowdfunding.
5) Explore Micro Banks
These banks provide services for businesses that do not require a lot of cash and offer packages in that light. Business owners can take micro-loans from small banks. More so, never take what you cannot afford to loose. These banks cater to low-income entrepreneurs in Nigeria. They include, BOI Microfinance Bank, which is a subsidiary of the Bank of Industry in Nigeria.
6) Focus On Industry Banks
Certain businesses can really leverage off banks that were designed specifically for that industry. For example, the Bank of Agriculture that offers packages for businesses that carry out agricultural services. These banks offer grants to businesses that fit in this line, hence you just might benefit from these offers. So tie your business idea to a sector and map out companies that fund businesses like yours.
7) Venture Capitalists
Different funding styles have monetary numbers attached to them. Venture capitalists invest in companies with a high number in capital ranging from 1million naira and above. The funding maintains a triangular pattern where clients give money to venture capitalists that in turn invest the money in promising companies with hopes of making the money off one or all of the companies.
Venture capitalists demand a lot of information about the business, requiring you to know a lot about this business idea. A business plan is therefore compulsory. The amount of money given also demands a high return on investment. Most Venture Capitalists ask for returns 3 or more times the initial amount within 5-8 years, or as the contract may state. Other entrepreneurs or investors mostly set up meetings with these kinds of investors. Your network speaks for you in that regard.
You need to be aware of every update available on funding your business; this keeps them informed on capital acquisition. It’s a dog-eat-dog world of business with stern competition; therefore, ideas must be executed as soon as they are believed to be feasible.