Funds are the lifeblood of any business enterprise. Without funds, a business can neither begin nor grow. “How then can an SME raise funds?”
We can tackle this question on two levels; (1) Raising funds to start up a business; (2) Raising funds to grow an existing business.
Startup funds:
1. Personal finances: To prove that your business is viable and real, you must at least invest some money, no matter how little, into the business as an initial fund source. If you are unwilling to do that, then it may be difficult to convince others to invest. When starting up a business, personal sacrifice is always required.
2. Family and friends: Most people who start up usually seek the assistance of family and friends who believe in the business owner's vision. Sometimes, the money is not given freely but earned in some other way, such as by the sale of something or traded for services not relating to the business, like childminding or doing some level of administrative or personal assistant work for the person providing the funds.
3. Microfinance loan or government programs specifically for SME: Several microfinance banks are willing to provide business funds to viable business ventures even while in the idea stage. In Nigeria, for example, the Central Bank of Nigeria has set up some grants and loan schemes for SMEs in certain categories of business.
Established business growth funds:
1. Retained earnings: An established business should have money set aside from profits which it can plow back into the business.
2. Sales of shares: The business can also have investors pay for shares as a source of funding to facilitate growth. Business accelerators offer access to capital and investment in return for startup equity.
3. Loans from commercial banks or government programs: Commercial banks have programs designed to help SMEs raise funds to enable the business to grow. Various government organizations also have loans and even grant schemes to assist SMEs, especially during the COVID pandemic, with affected many businesses.
4. Other sources of funds include venture capital and private equity firms, and angel investors.
Your business must decide the funding source that works best in the long and short term. For assistance on the best plans and how to go about raising the funds, fill out the form on the contact page or send me a message @ smecgcoach@gmail.com.