Home ENTREPRENEUR’S CORNER HOW TO SOURCE CAPITAL FOR YOUR BUSINESS

HOW TO SOURCE CAPITAL FOR YOUR BUSINESS

by Brenda

Acquiring capital to fund your start up business can be a very tedious process. Yet this stage can be the birth of a very flourishing venture. As an entrepreneur you have one or more of these sources of capital available to you. They include but are not limited to the following;

Personal funds: The personal funds of the entrepreneur are the least expensive funds available to the business. It consists mostly of funds saved over a period of time and represents a financial commitment to the business venture. These funds can help in attracting funding from government, banks and private investors, because they see the commitment of the entrepreneur to the venture and are thus willing to invest.

Monies from family and friends: Monies received from relations of the entrepreneur are another source of capital for the business venture. Although the amount of money may be insignificant, it adds to the goodwill of the business. The commitment of family and friends makes them feel a part of the business venture and presents a unique investment opportunity for the business. If the business is to flourish however, personal and family interests need to be set aside by documenting every money obtained and implementing strict business regulations to avoid future problems.

Bank loans: Bank loans are also an important source of capital for the business. They usually require a collateral in the form of a building, equipment or any other valuable tangible asset. Securing a loan is not an easy task, particularly because banks do not want to incur bad loans. As a new venture, you must provide sufficient information and a credible financial track record of the business to attract bank loans. The entrepreneur must also evaluate the lending procedures of banks to secure the capital on the most favourable terms.

Grants: Another source of capital for a business venture is grants from foreign governments and organisations. Unlike loans, grants do not have to be repaid with the principal and interest. Grants are often given freely to small business to serve at a catalyst for the growth of the business. Grants are normally competitive and a good research proposal coupled with a consistent track record can help secure the grant.

Private funding: Individual investors who seek unique investment opportunities are also a good source of capital for the new venture. While investors may require an ownership position and a great degree of control, entrepreneurs must be cautious in disclosing information to the investor lest he takes over the business completely.

All start-ups require capital and it is important for the entrepreneur to note that a successful business venture to a large extent will depend on the ability of the entrepreneur to explore all possible sources of capital to determine the most favourable.

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