Ways Of Effectively Financing A Start-up Company [Final Part]

A few days ago, we looked at ways which an entrepreneur can effectively finance their business in the stage of infancy. Financing of business at a start-up phase is usually one of the toughest parts of the business but that is a very inevitable and extremely important part.

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We looked at financing of business with personal funds and from the money the entrepreneur has saved over time. This is what is referred to as "bootstrapping", where the major (or all the) financial help is sourced personally from within. However, when this is limited, the entrepreneur can resort to asking for favour from family members and from friends. Here, we will look even further at other effective ways to raise capital and finance a start-up company.

1. Getting A Micro-loan (or Micro-grant)

I used the term "micro" explicitly here because there are facilities that are readily available to small and medium-sized companies at the start-up phase. The advantage here is, some of the issuers of these loan and grant facilities will be involved in monitoring of the processes and can also provide further assistance like connecting the business to customers, etc.

In this part of the world, there are many facilities like the "Small and Medium Enterprises Development Agency of Nigeria" (SMEDAN) which assists start-up SMEs with many facilities to run their company while monitoring the progresses made. There is also the "Tradermoni" for people going into small trading, and there are facilities for people going into agriculture. All these are micro-loan and micro-grant facilities and can come quicker than going to mainstream banks to seek for loans.

The difference between loan and grants is that you pay back the former but not the later. More so, some of these government assistance come as grant, but where the grants are taking longer, you can opt for a micro-loan.

2. Seeking For Investors And Collaborators

When you bring up a business idea, sometimes, there may be another person willing to partner with you. In this case, you share the financial burden and the stakes of the business will also be co-owned by the parties involved. Another way this works is; during the start-up phase of a company, the founder(s) will advertise for investors and through their partnership with the investors, funds can be raised to finance the company.

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In the cryptospace for example, this is used very often when a new project (or coin) is launched, they will run an ICO to raise more funds for the project, while the investors will own tokens which represent part-ownership of the project. While this good, it also bears its risks and disadvantages (just like others). For example, you will not be responsible to take all the decisions alone like in a case of sole proprietorship.

Note: Choose the option(s) that best appeals to you and do your research before venturing into business.

Thanks for reading