Did your heart skip one beat when you saw the title? Be honest. When I think about how to raise funds for an idea I care deeply about, I have to admit that my mind does. How can I raise such a large amount of money, which is beyond my capabilities? It’s a daunting prospect. This is why many people avoid starting a business. They are unable to raise the capital necessary to realize their dreams.
All hope is not lost. Let me share some of my experiences in raising money for your company:
It’s time to get back to basics.
The minimum amount you will need to start your business is determined. This means you need to cut back on all non-essential expenses. Are you going to need an official vehicle? Reduce it. You might be able to share your office with another company rather than renting yours. Reduce rent costs.
Invest in yourself
Your personal investment is the best place to start. Why should you let someone else invest your money if you are unable to do it yourself?
Debt or equity
When raising financing, you need to decide whether debt or equity is the best option. While equity financing is the investment in the business, debt financing is a loan from individuals or financial institutions. Both have their advantages and disadvantages. Equity financing is safer and allows you to reinvest the profits in the business. However, you will need to give up some ownership and can’t make significant decisions without the consent or input of shareholders. While debt financing allows you to keep complete control of your business, and you can end your relationship with the lender once the loan is repaid. The loan must be repaid within a set time frame, and if you have cash flow issues, it will make things more difficult.
Exploring social capital
Families and friends are a great place to begin once you’ve decided whether equity, debt, or some combination thereof. Your personal network is a great place to start selling your business idea.
Grants are available to help you fund your business idea. Grants are loans you don’t have to repay, but that comes with conditions. There are many grant opportunities available, particularly for companies in developing countries like Nigeria. These grants can be offered by multilateral or government agencies.
Get professional advice
To avoid signing agreements that could be detrimental to your company, get the advice of an investment lawyer or professional when you are seeking equity investment. If you work for someone who has majority ownership of your company, it is not wise.
Capital is not money.
Another way to raise money is to remember that capital isn’t just about money. Your experience and skills are also types of capital. These assets can be used to finance your business and reduce the amount of financing that you require.
It is difficult to raise financing for a startup business. Keep revising your plan and idea as you seek capital.