Some years ago a friend of mine wanted starting up a small business scale business, he had good business ideas but it couldn’t give him the capital needed to run this new business venture. Fast-forward into time, I took time to get him the laid down tracks on how to source fiance for a new venture.
Maybe this is your problem, You have gotten to the root of it, enjoy the ride as I take you on this journey.
Small scale business are a major part of any healthy economy. In recent years various factors such as the impact of privatization and specialization in industry and corporate restructuring and downsizing, as influenced by new management theories, have combined to encourage the emergence of more new ventures and medium-sized companies.
Yet, in spite of this increased awareness, recent development indicates that access to capital continues to be the most difficult challenge for new ventures and business owners.
There are several reasons while, even under optimal conditions, entrepreneurs are still not successful at getting adequate funding. Banks, by the very nature of their business are resistant to loans with high risks.
Potential entrepreneurs may also lack the business know how to articulate what they in business. Most new business are also afraid to invest the little thry have for the fear of drowning and leaving them empty.
Top entrepreneurs understand that raising money is a way of life. Many first time entrepreneurs erroneously believe that money is not essential criteria for fostering a new business venture, thry often times think that a business idea covers all range.
Having x-rayed this factors above, I will be profering possible ways to source for funds for your new venture, I will also give you a guideline of how to go about it.
Sources of Funding for new Ventures.
Personal Source: This is the entrepreneur’s savings or wealth inherited. There is a very significant evidence globally that entrepreneurs depend on personal savings to start a new venture. This is because the cash is readily available and can be mobilized easily and quickly.
Entrepreneurs have a strong need for autonomy, independence and self reliance. This need maybe expressed in the desire to have control over the enterprise and to depend on personal resources to finance the enterprise.
Personal resources is the most reliable source to fund a new venture. This is because there are not much protocol to go about it, It’s just a matter of decisions of the entrepreneur.
Partners and Entrepreneurial team: Two or more individuals may come together if they share sane business idea or values. They will combine resources to start a new business venture. Through the partnership more capital can be raised through the contribution of individual members. Members of the team contributes a certain percentage based on agreement. Some will contribute money others skill and knowledge. This keeps the partners going provide the business is yielding results.
Loans from family, friends and associates:
Family members and close friends are usually some times willing to contribute financial assistance to the would be entrepreneur once they are strongly given that the business will be effectively managed to yield profit.
Sometimes, it doesn’t seem easy because most famiy members maybe afraid to take such risk especially if the would be entrepreneur is not experienced. However, this doesn’t seem to be a problem if they trust in your abilities and skills.
Rotating saving scheme and money lenders : This is popularly called ‘Osusu’. Entrepreneurs can join this group. It is a well organized rotating saving scheme and it very dependable to raising capital for a new venture. Sometimes you could be given a certain percentage for saving a specific amount of money.
Trade credit and accruals: Trade credits are created when the new venture firm purchases raw materials, supplies or goods for production or resale on credit terms with or without signing any formal agreement for the liability. They are called purchase on account and they represent the largest source of short-term financing for most new venture.
Hire Purchase : A hire purchase is a credit sale agreement by which the owner of an asset or supplier grant the buyer the right to take possession of the asset, but ownership will not pass until all the installment payments have been made. The buyer will pay the hire purchase installment over an agreed period of time. A hire purchases agreement conserves the entrepreneur’s resources for another purpose and it does not restrain the operating capability of the entrepreneurs.
Feel free to ask any question on the comment session.