Where To Find The Money To Start, Grow And Scale Your Business

Cash is critical to a successful enterprise. You need money at the beginning when you start with little or no business experience and have not demonstrated an ability to make money.

You also need money when you want to grow and scale the business to new heights. While your business plan provides a guide for estimating the initial financing that you need to start and run the business until it becomes profitable and starts generating enough revenue to sustain it, you equally need a financial plan when you want to expand the business.

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How To Raise Capital To Start And Grow Your Business

How do you raise the capital to start, grow and scale your business? There are two primary sources for raising money: debt and equity, all other sources are derivatives.

Debts represent obligations entered into by the business, which are expected to be repaid with proceeds from the business.

On the other hand, equity investments require that you surrender partial control of your business in return for other people’s money.

A breakdown of some of the options for getting money to run your business are:

1. Sweat Equity

Many start-ups begin with founders who have the skills to run their businesses as “one-man- shows”, long before the business can hire staff and expand operations.

For example, a person with training and experience in masonry and construction can start a building construction business with practically no capital, by getting jobs with his good references and leveraging his skills to perform them. The same goes for someone trained in software engineering. What such a person would do is to build an application prototype from the comfort of his home and show it to potential customers; the same way that the likes of Bill Gates started Microsoft and Steve Jobs founded Apple.

If you are cash-strapped but have the skills needed to start your business, sweat equity is a great way to launch your business. It enables you to contribute your labour, skill and time, as opposed to cash, towards the start and growth of your business.

2. Personal Savings

Nothing beats the founder’s own resources when starting a business. Before you start looking for investors, or think of borrowing, you need to consider your resources, to determine how much of it you are willing to commit to the business.

The more of your own money that you invest in the business, the easier it will be to attract investors and lenders. Investors and lenders are more comfortable working with entrepreneurs who are invested in their businesses and have skin in the game.

You can raise money through personal savings or the sale of assets that you don’t need. For example, if you have a plot of land that you acquired many years ago and have appreciated, you can sell it and invest the proceeds in your business.

3. Friends And Family

The advantage of borrowing from friends and family is that they will give you money on terms that you are not likely to get from elsewhere.

Friends and family can give you money on goodwill, without asking for interest or security, and will show understanding if the business goes through rough patches or fails. For friends and family, the profit motive is second. Their primary desire for putting money into your business is to support you, to help you succeed, not because they want you to make money for them.

4. Investors

If you cannot raise the funding you need on your own, you should consider bringing in investors who will put money into the business in exchange for shareholding. An investor shares in the profits or losses of the business. Thus, an investor may demand a say in the running of the business.

The choice of an investor goes beyond simply seeking to acquire investable funds. You should also consider the expertise and guidance that the business needs to succeed, and how potential investors can add such values beyond bringing money. You should also be scrupulous in your search for investors, by paying special attention to how well you know them, the expectations they have for you and how involved they want to be in the business.

5. Angel Investors

Potential angel investors can be accessed through introductions from other start-up founders, at live pitch events and online.

This class of investors are willing to fund small operations and offer more flexible terms, besides their experience and relationships.

6. Venture Capitalists

These are the guardian angels of entrepreneurs.

They are in search of businesses for their funds. They are reputed to carry the biggest chequebooks and possess a huge appetite for risking money to fund new businesses in the hope of reaping rich rewards in the case of success.

7. Loans

Commercial banks are the most unlikely sources of capital for start-ups and small businesses. However, as your business gains traction, it could be in a position to access business loans.

If you have a good relationship with your bank, you may be able to convince your bank manager to give you a loan to grow your business. To improve your chances of success in getting a bank loan, you will need to prove that you or your business has skin in the game.

8. Government Money

This includes grants, which are free and given by non-profit organisations or funds from development finance institutions which are disbursed on concessionary terms to entrepreneurs who meet specified criteria.

Government sources of funds available for you to start, grow and scale your business will include the Central Bank of Nigeria, Bank of Industry, Development Bank of Nigeria and Lagos State Employment Trust Fund.

9. Private Money

The avenues for private money include non-governmental sources. Examples are the Tony Elumelu Entrepreneurship Programme and GroFin which provide structured finance, business support services and networks that aim to improve the chances of success of your business.

10. Grants

These are funds that are free and do not require repayments. Sources of grants include the United States African Development Foundation (USADF) which supports African-owned enterprises to improve lives in poor communities in Africa.

There is also the Global Innovation Fund (GIF) that invests in the development, piloting and scaling of innovations that seek to improve the lives of the poorest people in the developing world, particularly those living on less than $5 a day.

For detailed listings of the sources of funds mentioned here, get Where To Find The Money To Start, Grow And Scale Your Business , our free e-book on the subject.

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If you need to raise capital to start, grow and scale your business, contact us today.

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