There is no business if the owner or entrepreneur has no money to fund it. No matter how small any business is, it needs money to start- even if it is a dollar. the more funds available for an entrepreneur, the more a business is likely to grow.
Some entrepreneurs and indeed many small and medium scale business owners find it difficult to source for funds and also, do not know where and how to source for funds. Many have also tried so many sources but found little or nothing maybe because they searched in a wrong place, had their business plans rejected or poorly presented their business.
In this article, we would be looking at various sources of funding that you can explore to get sufficient funds for your business. We all know that sources of funds are diverse and divergent and have made so many business ideas that would have turned into multi-million dollar business to fizzle out.
Sources of funds for small and medium scale business
Below are some of the sources of funds for small and medium scale businesses:
Family and friends: you might think none of them would like to sponsor your business but the truth is that if they see that the business would yield money, the wealthy one among them will. If none of them is wealthy, a collective family property may be sold to sponsor the business.
The most interesting part of sourcing loans from your family and friends is that it is a soft loan (most times are interest-free or may require small interest that you won’t even feel the impact). Also, the time frame for repayment is more than that of some financial institutions and you might not even have to pay back.
Personal savings: yes! This should be one of the main things to consider before sourcing for funds. You can increase your propensity to save and with time, you would have just enough to start your business. You can take up small jobs and work for other people to get the money ready.
This is not a fast way of getting funds for huge businesses. It is also advised that you do not use all your savings in funding your business so as to have something to fall back on. This source requires no interest and you don’t have to pay back.
Trade credits: trade credit is a form of funding in which suppliers of raw materials to companies and the payment is deferred. The buyer is to pay for the raw materials or supplies at a future date. With this, the company or business make use of the raw materials in production, makes his gains and then pays.
Bank credits: banks all over the world provide the major source of funds to business especially those that have shown signs of being successful. There are two types of loans that you can be accessed by businesses and it is open to both new and existing businesses.
Overdraft: as a bank’s customer, you are entitled to overdraw your account. There is a limit to the amount you can withdraw and so, you can consult your personal banker at your bank and enquire more. You as an entrepreneur or someone who wants to start a small or medium scale business can leverage on this type of loan.
Term loan: in this type of loan, you have to provide collaterals and the likes before it can be granted. It also comes with interest rates depending on the time duration- short, medium or long term.
Government: so many entrepreneurs and to-be entrepreneurs do not know that their government has schemes set up to provide loans for them. The Nigerian government, for example, has several agencies and specialized banks that were established to provide loans to business owners and startups.
These establishments are to foster economic and industrial growth in the country and they include Bank of Industry (BOI), Nigeria Agricultural Cooperative and Rural Development Bank, Mortgage bankers, Funds for Small Scale industries (FUSSI), National Directorate of Employment (NDE), etc.
For instance, the Bank of Industry (BOI) has several funds available for businesses like the Graduate Entrepreneurship Fund (GEF), Cottage Agro Processing (CAP) fund, and the Develo. Dangote also invested a huge sum of money to this bank in a bid to promote and encourage small scale businesses. You can go to their website boi.ng and find more about how to apply.
Just find out similar agencies in your country and research on how to get started.
Age grade association: you must have an age grade association in which you belong to. Have you ever thought of applying for a loan from yours for your business? It might not have crossed your mind but it actually works.
Thrift societies: these are organized self-help bodies of individuals who contribute money and make same available for members to borrow from at very low-interest rates for the purpose of starting new businesses or expand existing ones.
Service contract: in our previous post here, we mentioned that before you start a business, you must have to learn about the business. A service contract is a form of financial support that a servant receives from his master after successfully, dedicatedly completed an apprenticeship. You might want to go for this if you don’t have any other means of getting funds for your business.
Partnership: yes partnership! If you have a great business idea but you don’t have enough fund for your business, then you might have to consider entering into a partnership with some other people. With this, you will have sufficient funds for your business. There are two types of partnership that one can enter into and they include the general partnership and limited partnership.
Private and public establishments: some private companies come up with programs in which they search for talented people and great business ideas that have great potentials. Find out if there are such companies around your country and enroll for it. In Nigeria for instance, the YouWin program, Tony Elumelu fund, etc. are there and you can find more about them and enroll.
Conclusion: You have read through our hand-picked sources of funds for a startup. Do you agree with our list or have something else to add? We would like to hear from you. Comment your thoughts on the comment box below.