Startup capital has been one of the greatest limiting factors to people who wish to own small businesses. It is true that not all of us were born great, but each of us has the ability to achieve greatness regardless of the condition we were born into. Before you establish a business, you must first evaluate yourself; know your strengths and weaknesses, your skills, your location, your financial status and your availability (time factor). Funding a new business has never been easy, but then there is no cause to worry. So many successful large businesses started small before becoming large and with hard work, perseverance, and focus, you too can become a success story.
For those wishing to startup small businesses but have financial constraints, like the majority of entrepreneurs, here is how you can go about locating the funds you need to finance your business:
- Internally generated fund (bootstrapping)
So many private businesses are being funded with internally generated fund. There are so many ways one can generate fund for a new business, and one sure way is to bootstrap it. Bootstrapping is simply the funding of your business from your personal finances with little assistance from others. Bootstrapping is very helpful because it offers you an incentive to work harder knowing that your personal money and that of the others are at stake. It will be a driving force that will compel you to be dedicated and committed to the success of the business.
Here are few ways you can bootstrap your business:
- Personal savings
What a better way to get a startup capital than with your personal savings? By default, if you are looking for a way to finance your business, the first place to look into is in your savings, how much you have there. Using your personal money will give you a total control of the business processes and also a sense of calm and peace of mind, knowing that you don’t owe anybody and therefore there is no urgency and burden of loan repayment. On the other hand, it will also compel you to work harder for the success of the business, knowing that anything short of success will leave you in a financial quagmire. The downside of this method is that you may not have enough for a good business of your dream.
- Consider borrowing from family and friends
But what if you don’t have enough in your savings, does it mean you can’t start your own business? Not at all. Another beautiful way, though very risky, to get a startup capital is to borrow from friends and families, if you are borrowing from friends, it is advisable to go to those who are trustworthy and who have your best interest at heart. If you are considering borrowing from your families, you can go directly to individual members or make use of a family joint venture like land. In either way, if you are borrowing a large sum of money, always involve a lawyer and make it official. The good side is that, like financing from your personal money, it will make you to work harder, the bad side is that, it is putting your relationship with your loved ones at stake and also putting your business in the line, should the business fail, you will have your family and friends to deal with.
- Credit card option
Your credit card can offer you a means of getting a startup capital for your small business. Just simply sign up with a credit card company and there you go, you establish your company on credit. The good side is that you don’t need any personal or friends’ and family’s money to startup your business, the bad side is that, it carries interest and you have to be making your monthly credit card payment on time to avoid large accumulation of interest and the risk of running bankrupt and forfeiting your business.
- Trade credit
This is similar to credit card option, but the difference is that, you approach your suppliers directly to make all your business startup purchases on credit. Though at first, they will be skeptical to offer you their products and services on credit and may demand payments at the initial stage, the secret here is to have a solid financial plan that can convince them of your vision and commitment to the success of the business.
- Get a partner
This is a win – win situation. You have an idea but no money; he has money but no idea, the marriage is made in heaven. Bring your business idea and expertise and he will bring his money and everything will work out good for both.
- Outside fund
Another way of getting a startup capital is to make use of the bank. If you don’t have access to the mainstream banks, there are microfinance banks that are ready to finance your business provided you have a convincing business proposal, without collateral and at a very low interest rate.
