As I walked out of the meeting with some young entrepreneurs, one came to me and said, “all I need is Ugx500,000 and I am sorted!”. I knew she was trained in area that the rest of the incubatees weren't and would value her advise. She would have offered her advisory services for a small fee and start saving up for the money she needed.
The challenge is that most businesses want expert advise for free. Of course there is a place for probono services but not all the time. We have to appreciate that the same way we take time to nurture our businesses is the same way the experts take time to acquire knowledge and continuous professional development (CPD). Time is money and the CPDs have to be paid for as well.
I went away from the meeting thinking of how many start-ups have not yet taken off because of lack of capital as it were. I have therefore read about and made an attempt to put down some sources of funding that one may consider:
- Bootstrapping or Self-Funding
Self-funding from your savings (if you have it) is always preferred. This needs quite some disciple to pool enough resources depending on your start up budget.
- Friends and Family
Borrowing from your friends and family is a good way for new businesses to get money. It is not uncommon for relatives to make low interest or no interest loans to family members. However, you risk alienating your family if the business falls on hard times and you have trouble repaying the loan. Be sure that you have a written agreement regarding the amount borrowed, the interest rate and how and when the loan is to be repaid.
A start-up incubator is a company, university or other organization that ponies up resources–laboratories, office space, consulting, cash, marketing–in exchange for equity in young companies when they are most vulnerable.
Exchanging goods or services as a substitute for cash can be a great way to run on a little wallet. I previously wrote an article on how one can do business without money.
- Suppliers Credit
Get your initial stock or raw materials and even finished products on credit and repay as you sale and maintain that cycle
- Disposal of assets
Disposal of assets not in use or expensive ones for cheaper alternatives serving the same purpose. You may have a car that is a fuel guzzler that you can dispose off and buy a more fuel efficient car, this instantly avails you funds. The same applies for other assets and things you do not need, OLX them!
- Reinvested profits or internal company sources
If you have another line of business, you can use some of the profits and retained income to finance your start-up or another line of business.
- Pre-financed facility or advance payment
Some customers would be willing to cover your development costs in order to be able to buy your product before the rest of the world can. Their advantage: control over your production process (to make sure it meets their requirements) and the promise of dedicated support. Even large companies look to their best customers to fund new projects–this is the essence of good business development
- Win a business competition
Participate and win a business competition for a particular cause. There so many competitions nowadays that offer some prize money for the top three winners. I have sat in a couple of panels awarding these and all you have to do is convince the judges that you have an executable idea that will go along way in supporting the course. Causes range from Youth Entrepreneurship, Women in Business, Girl child empowerment, Community transformation, Opportunities for a vulnerable groups e.t.c e.t.c
- Bank Loan or Overdraft
It has been reported that the most important factor in getting a small loan is the credit history of the borrower. If you don’t have a good credit history, clear up all your credit problems before you go to a bank for a loan.
- Form a partnership
A more established company may have a strategic interest in helping to develop your product—and be willing to advance funding to make it happen. I know several companies that develop customized social networks for large enterprises, with the expectation of using that funding and experience to compete in the consumer market someday.
- Grants or Government support
Grants are available most frequently to non-profit companies, although some grants exist for "for-profit" companies. What is almost impossible to come by is a grant for a business start-up. Most grants are made available for the development of a product or service that will benefit the public or will generate a product or service the government needs.
- Offices of Economic Development
These are state and local entities that provide financing and information on finding other sources of capital. Economic Development gives money to a lot of technology and manufacturing businesses, but programs change annually.
- Angel Investors
Angels are people with money who are looking for an investment that will give them a better return than traditional investments. For those looking for $25,000 to $250,000, angel networks can come in handy. Networking is critical here, and you need to find angels who understand your industry and share your passion
- Venture Capital
As a rule of thumb, don’t try this one in the earlier stages; in fact, don’t try it unless you need more than $1 million. VCs take their pound of flesh in equity and control. Venture capitalists are mostly interested in companies that have a solid track record and are expected to grow by at least 20% a year. They also want to buy into the company, not just make a loan. In addition to firm ownership, venture capitalists will also want management input in the form of board seats or executive positions. In general, the following characteristics are what venture firms are looking for: Extraordinary growth potential; Management talent and experience; Proprietary products or services
This is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet. For more details visit http://www.crowdfunding.com/
Options are many, but you need to carefully evaluate them depending on the size of the business and the sums involved, whether you need short term or long term financing.
To your success!