It is the wish of most people to be bosses of their own businesses. Of course, the reason for this is not far-fetched. In the first instance, self-employment enables an individual to regulate his working hours and also determine how much he wants to earn.
Importantly, entrepreneurship gives one the opportunity to fully utilise his abilities without being hampered by the limitations of the workplace. In other words, when one is self-employed, he is definitely no longer subject to employer‘s whims and caprices.
However, as enticing as the idea of owning one‘s business is, not everyone who desires it can achieve it.
One major reason for this is dearth of funds. Businesses are built with resources, chief among which is money. Therefore, starting a new business requires that one has access to the needed funds.
However, this is not an easy process, especially in a business environment like Nigeria’s, where access to credit is difficult.
There is the need, therefore, to explore several means of getting the needed fund without necessarily paying the prevalent high interest imposed by banks.
In her article, ”How to Raise Money to Start a Business,” published in powerhomebiz.com, Ms Isabel Isidro, says that the first place to look for financing is right at home, by accessing personal savings and assets. These are the easiest sources of capital.
She states, ”If you have money set aside, you use it instead of borrowing or rounding up investors. Or, you can take an inventory of items you do not need and have a garage sale. Most people are pleasantly surprised how much cash they can raise in a single weekend. You can also use your stocks, bonds, pension plans, life insurance policies and real estate to raise the needed capital. Those who own homes oftentimes secure equity loans and use the proceeds to start a business.”
She, however, notes that most new entrepreneurs do not have adequate personal savings to fund new business.
”Others, on the other hand, have savings but refuse to dip into their piggy bank for a variety of reasons. It may be their retirement money or for emergencies; while others would rather use their savings as collateral and borrow against it at a low interest rate,” she adds.
Speaking in a similar vein, a business consultant and the Chief Executive Officer, Newage Leasing Limited, Ms. Kemi Samuel, notes that every business at one point in time needs finance, whether at start-up stage, to expand or to venture into other related businesses.
She says, ”My sincere recommendation for start-ups is to start small, either with personal savings or seek assistance from friends and families and get them to buy into your idea so they can support you.”
But she also warns that bringing friends and relatives on board should not be done without considering some factors.
”If you are comfortable with co-owning the business with members of your family, then you can bring them on board,” Samuel explains.
Isidro adds, ”If you are borrowing from family members instead of asking them to invest, maintain a very businesslike and impersonal procedure. To avoid putting strain on the relationship, it is better to draw up a formal agreement in order to put the terms of the loan in writing. It is important to view the participants as business associates.”
She also canvasses the possibility of approaching venture capital firms. These are professional investors, usually in charge of a large pool of capital, gathered from a range of sources.
”These firms invest in new, even high-risk or speculative businesses without a proven track record, with the potential for rapid growth and high returns in a short time,” she explains.
Samuel points out that it is easier for growing businesses to access credit than new ones.
She says, ”Some people will be quick to ask that why would a Dangote, for example, get a credit line for a new business it is venturing into and others would not? Is it also not a start-up? Every lender wants to minimise his risks as much as possible and would be comfortable giving Dangote a credit line for a start-up business because Dangote is established, has track record and has other businesses to fall back on if this start-up business should fail.”
The Newage Leasing boss, however, warns that getting access to funds will come with a certain degree of diligence. For instance, she says that an entrepreneur needs to prepare himself to be able to convince prospective lenders or investors to provide funding for his business ideas.
She explains, ”Prepare a solid business plan. Lenders or investors look out for businesses that show promise and they would only give their money to business people, who have sound personal and business financials and are committed to the success of their businesses. Not only must your business plan be sound and solid but must be well presented. Be prepared to stake your own money in form of equity. Lenders are comfortable with entrepreneurs that are willing to stake personal funds of not less than 25 per cent in the business they finance.
She counsels further, “Be passionate and be open to constructive criticisms. If lender A is not comfortable with your idea, take note of the issues raised, go back and do your homework, fine-tune it and take to either lender A again or another prospective lender; for already existing business. In the simplest form, document your business, show simple cash flow, bank your sales proceeds. Also, have a sales and purchase record book because these are the information a prospective lender will have to work with.
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