Having a business idea is a great thing, bringing it to life is a different ball game all together.
Before starting a business you would have got an idea in your mind and be planning how such an idea will work out before thinking of implementing it.
In Nigeria starting and growing a business is quite hard due to the particular features and factors around the Nigerian environment which can make it difficult for your idea to come to reality.
A major factor and component that will determine your business idea becoming a reality leading to you eventually creating and starting that business is finance.
Agreed there are businesses that do not require a lot of money to set up and start, but all the same money is needed.
Money is not easy to come by especially for an Entrepreneur who is trying to a start a business, this could be the first major challenge and obstacle that one can face in the early part of a business.
So why is funding so important in business, here are a few reasons:
Money will be needed in registering your business as this will help you in transacting much easily and better with people and society.
Depending on the type of business and your skill set and amount of experience you have acquired you may need to improve your self and acquire more knowledge by attending courses, trainings and workshops money will be needed to do this.
Payment will be needed for acquiring fixed assets that could include machinery, equipment, land and other properties and materials needed for the business.
Payment of running costs such as salaries, utility bills, transport, fuel and lots more.
All these factors stated above will be needed when a business is ready to take off, the amount of money that will be needed will be determined and dependent on the type and level of business as well as the size of the business , where it will be located, assets and properties needed, quality of staff needed and lots more.
What are the ways an entrepreneur can acquire funding to set that great idea into motion? Below are sources of funding:
#1. Personal Savings
This is usually the first point of call for an entrepreneur.
When you get an idea it is common to put something aside regularly with the plan that one day you will save enough money to execute the idea.
Most people before venturing into business would have worked for some years and gathered some experience and during those years would have been saving up for the day they will leave work and start business.
A good thing about this source of funding is that it is not borrowed meaning that the entrepreneur does not have to worry about paying back.
Also there is less worry about the business succeeding or not as there is no added stress of the business failing and then having to pay back what has been borrowed.
It can make the entrepreneur give their best.
#2. Family, Relatives And Friends
Ideally if your personal savings is not enough to set up and start the business or you do not even have any savings at all, the next place to source for funds is from people close to you such as your family and friends.
Similar advantage like when you use your personal savings, although in some cases you may be required to pay back.
This is where is gets critical for the entrepreneur as unlike funds from personal savings and family where you may not need to pay back or when paying will have enough time and may not have to pay a lot of interest, loans attracts interest within a limited time.
Loans can be given by private individuals, financial houses, cooperatives and government.
Private sources will give loans which may attract interest that is very high, sometimes these sources may demand to be involved in the business as part of the requirements for the loan
Banks and other supporting financial institutions also give out loans, although it should be stated that commercial banks and micro finance banks do not particularly like giving loans to businesses starting from the scratch and when they do their conditions are usually strict and interest rate high.
Loan given are in the form of
Short term: are loans usually for six months
Medium term: loans usually given for a year
Long term: This is a loan given for two years; most entrepreneurs are not able to get this type of loans because of the difficult requirements attached to it.
Cooperatives help their members by giving loans to them to start and grow their business. This is why entrepreneurs are encouraged to join such cooperatives that they share a common interest with so that they can enjoy such benefits.
Government also helps in providing loans and assistance to entrepreneurs in various parts of the economy. Government is often criticized for not helping small scale business as well as established ones, but there are programs set up by government to assist people by giving them loans to help their business.
#4. Angel Investors
Have you heard of Angel Investors? There are so many of them nowadays. What they do is, give reasonable amount of money to fund business ideas that have serious economic impact in the society.
They give this money in the form of loan but they will never ask for the refund. A typical example of an angel investor is Tony Elumelu Foundation. Another one if YouWin Program.
They usually give certain amount of money to startups that are able to proof that their business plan is viable. It’s up to you to learn how to access these funds.
DO you know of any other ways can you fund your business ideas? Share with us in the comment below.
Click here to Join Recharge and Get Paid
Click here to Read Latest School News in Nigeria