7 Sources of Finance for Small Businesses
Last week, we spoke to a small business owner who said she would be glad if she got #50,000 to stock up for her business. This speaks to how difficult it is for many business owners to get funding. However, many financing options exist, but these business owners are unaware of them, so they lose out.
To close that gap and increase the rate of access to finance for business owners, here are 7 sources of finance for your small business and how to successfully get them. Let’s get right in.
7 Finance Sources to Grow Your Small Business
Getting funding for your small business is key whether you are just starting or are already in the game. With adequate funding, you can reach more customers, expand your service offerings, and scale greatly. Below are 7 sources of finance to grow your small business.
1. Personal savings
The first source of savings for any business owner is your savings and funds. This is a no-brainer, and it shows the level of confidence and commitment you have in the business idea being conceived.
By investing your funds, you would also be fulfilling one of the conditions of professional lenders which requires you to fund the idea with your money, before requesting funds from others.
2. Family and friends
Another easy way to raise funds for your business is by getting money from family and friends. It is much easier to raise funds from family and friends than from banks and other lenders, due to the closeness of the relationship.
Sometimes, those funds can even be gifts or come with little or no interest and no stringent conditions regarding returns. However, raising funds from these set of individuals also has its limitations, as relationships may be strained in situations of business failure, or difficulty in paying back, as at the agreed upon time.
You should read: 7 common mistakes newbie business owners make
3. Loans
Ranging from banks, co-operative societies, government institutions, private lenders, etc. loans are another means of getting funds to start your new or grow an existing business. There are various types of loans, such as secured and unsecured bank loans, business lines of credit, business term loans, and microloans- which we give at Triift Africa, etc.
With these loans, you can get adequate money to grow your business; however, you will have to pay a stipulated interest within a specified period. Also, there are certain conditions attached to some kinds of loans, such as having collateral, a guarantor, and more.
We give out collateral-free loans at Triift Africa, to take your business from struggling to thriving. Apply here.
Related: 7 Loan Application Mistakes Small Business Owners Must Avoid
4. Grants
Grants from government agencies and other private organizations like the Tony Elumelu Foundation are another source of funding for both new and existing businesses. These grants are given based on fulfilling certain criteria as set by the organization, and they are given freely, with no expectation of being refunded. However the money must be used under the guidelines of the grants, or else a refund may be requested, if misappropriated.
This is the best kind of funding most business owners desire. However, it requires lots of preparation in terms of creating core documents and applying to the best of your knowledge to convince the institution that your business is worthy of the funding.
5. Angel Investors
Angel investors are rich individuals who invest in small businesses, to take a stake in the business equity. With angel investors, you get more than money, as they also provide business advisory and expertise to help grow the business.
Another advantage of getting funded by angel investors is that they do not insist on getting full control of the business, as they can sell their shares for a profit when they like.
Must read: 4 Financial Numbers Every Small Business Owner Should Analyze for Growth
6. Business accelerators
Business accelerators are like incubators where new and growing businesses are invited to be developed and mentored from the early stage till they grow to a reasonable extent. With business accelerators, business owners are mentored by experienced business owners on how to run a successful business.
Now, business accelerators are not sources of funds, however, they can give you access to funding like grants, loans, etc. from the organizers or their partners. They are majorly organized to impart knowledge and for networking purposes.
Related: The START BootCamp is an example of an accelerator program where student entrepreneurs can access business knowledge, mentorship, and funding to expand their businesses.
7. Leasing
Leasing is a form of funding whereby a business makes part payments for tools and equipment, with a structure for monthly payments to balance up. There are two types of leasing, such as:
Financial leasing: This form of leasing involves the business owner paying for the asset in installments, and after the leasing period has expired, he/she gets full possession of the asset.
Operating leasing: In this form of lease, the business owner gets an asset, and uses it for the period of the lease. However, the business owner has to return the asset after the contract expires or enter a new contract to continue usage. Ownership is not transferred in this case.
Your Business Deserves Funding
Funding is one of the pivotal elements necessary for a business to succeed. Without adequate funding, business ideas are left unexecuted, and executed ideas stagnate and eventually die.
However, with adequate funding in the hands of visionary business owners, businesses will soar, profits will be made, employment opportunities will be provided, and the economy will bloom.
This is one of our core focuses at Triift Africa – to put more money in the hands of small business owners in the form of no-collateral microloans to aid business expansion and growth. So need a loan to fund business expenses, and expand your offerings and reach? Apply for a microloan today.
