Here is how to raise money to kick start any business idea. 9 strategies to get business capital from personal savings to bank loans and grants
Strategies To Raise Money For Your Business Start-up
PREAMBLE
With the help of BizIQ.ng, millions of aspiring entrepreneurs have business ideas that can conquer the world and of course we all need money so get started.
The whole of this blog site is all about how you can start your own business, there are small business ideas and there are also big ones.
However, here is how to get capital to kick start any business idea.
One of the major factors that is affecting new business establishment is the issue of finance. Most aspiring entrepreneurs do not know how to raise money for business.
As I always say, Never give up on your dreams, you know why? Because you might just be the next Aliko Dangote or Bill Gates.
Raising capital to start a new business is challenging and often requires a lot of determination and patience.
In this article, I am going to list and explain ways you can fund your new business. I am sure you will get one or two that will definitely work for you, trust me.
How to Raise Capital to Start your Business in Nigeria
Here are 9 ways to save money for a new business start-up in Nigeria.
1. Raise Capital Through Your Personal Savings
Most aspiring entrepreneurs love to go into dept or rely on someone when it comes to money to start up a business. I don't think this is a good idea.
When it comes to empowering yourself, the first thing is to stand on your feet and think about how to do it all by yourself before thinking about someone else.
This is why I choose to start with this step, "raising capital through your own personal savings". Just saving little at a time can amount to much at the end of the day.
The best way to raise capital through this method is to start saving early. Start saving from the very first day you conceive the business idea.
3 Techniques to Save Money For Your Business
Don't assume you must go into debt before you can start your own business and secondly, don't live in a fast food culture where the word “patience” is absent from your vocabulary.
Put forth the sacrifice it takes to actually save more than enough money to start.
Here are 3 techniques you can use to save capital for your new business.
1. Get Rid of Your Debt
Let me start with "Debt" because we all seem to have it. Whether it is student loan debt, car debt, credit card debt, a mortgage, a personal loan, or anything in between.
Take some minutes to run a quick calculation on all of your monthly debt payments. Now, imagine how much you can save if these debts were gone.
When you get rid of debt, all of that money that was going towards repaying a debt can be put towards something else, like startup money for business.
2. Discretionary Spending
Discretionary spending is defined as money spent by consumers on things other than necessary things such as food, clothes, and fuel.
Eliminate discretionary spending like, eating out, online shopping, grabbing drinks on the weekend, and buying things you don’t really need.
You should be able to come up with thousands of naira per month, this money can be added to your start up capital savings.
3. Automatic Savings plan
Thanks to modern technology, it is very easy to set up an automatic savings plan through your bank
Contact your bank to learn how they can save your money automatically for you each time you get paid directly to your bank account.
I use Zenith bank and when I walked to the customer care service to learn how they can automatically save my money for me, I was told about "Target Savings" by Zenith bank.
A certain amount of money will be automatically deducted from my bank account to my "Target Savings account" every month. And I was able to save unexpected amount of money in 18 months.
It doesn’t matter if it is N5,000 or N15,000 setting this up automatically will ensure you save money every single time you are paid.
2. Raise Capital Through Partnership
This is another way to raise capital for your business. I know you’ve got the business idea, skills and all that is required for you to start a business. But with little or no capital.
Did you know that some people have the cash but may not have the time, ideas, knowledge, or skills that are required to start a business.
So what to do? Partner with someone ready to foot the bills to establish the business, while you bring the business idea to the table. The two of your will work based on agreed business formula.
So many big and successful entrepreneurs actually started out by partnering with people who were ready to bring in the required capital for their startups.
Don't be surprise that some of the most successful companies in the world like Apple, Microsoft and Google have at least two co-founders.
You will have to draft an agreement that states the stake of every partner involved in your business.
Trust is important in partnership structures, so it is important that you choose a partner that you trust.
How to Find a Business Partner
If you're trying to find a business partner, there are several approaches you can take. These steps will help you explore the possible avenues for finding a business partner.
1. Collaborate with friends
Friends can make excellent business partners when your skills, education and experience complement each other.
look for friends or acquaintances that excel in areas you're less familiar with.
2. Evaluate your colleagues
Consider your former and current colleagues who are the most dedicated, innovative, efficient and with whom you have a positive working relationship.
3. Attend industry events
Attending industry events like; conferences, lectures and trade shows can present great opportunities for a potential business partnership.
Why? Because, they bring together people with the same interests.
4. Explore online entrepreneur networks
A lot of websites exist for entrepreneurs seeking business partners. These websites typically allow you to create your own profile and browse others’.
Here are a few examples:
- CoFoundersLab
- Cofoundme.org
- TechCofounder
3. Raise Capital Through Angel Investors
Who are angel investors? They are individuals who has enough money and is willing to invest in your business idea in exchange for some ownership equity.
95% of banks and investment firms don’t like to invest in new businesses because they see it as high risk. So, this is where angel investors come in.
An angel investor could be a successful entrepreneur, a well-paid senior employee, or a high net-worth individuals who are drawn to the opportunity of high returns that come with making high-risk investments.
In addition to the money they invest, angel investors are always known to provide coaching and mentorship which you will need for your new business.
What are the requirements for an angel investor? It is a detailed and strong business plan and also an ownership stake in your business.
In most cases, angels are just very rich individuals who enjoy helping new entrepreneurs with their business.
Top 4 places to Find Angel Investors
Here are top 5 places to find angel investors who would be willing to raise capital for your new business.
1. Family and friends
The best place to find angel investors is in your family or among your friends. Why? Because they already know you enough to determine if you are worth investing in without any references.
The major disadvantage is that it is very difficult to mix business and personal relationships together.
2. Religious or Social organizations
Another good place to find angel investors is in your religious or social organizations. You can approach any fellow member who has enough money and make your pitch to them.
It does not mean they must give you money but, as part of their members, they will give you a good hearing and offer you any assistance they are able to.
3. Social media
Social media networks like Twitter, Instagram, Facebook and LinkedIn are also good avenues to meet people like angel investors. Get to know them and tell them about your business idea.
NOTE, don't act like a scammer. Do it professionally. Everyone on social media is a real person, not a friendly robot.
You must treat them as real people with all courtesy and professionalism.
4. Seminars and workshops
Seminars are held from time to time with large and mixed audience. If you think a seminar will most likely attract angel investors, try to attend such seminar.
4. Raise Capital Through Crowdfunding
Crowdfunding is also known as crowd financing and it is a new and revolutionary way of raising startup capital for your new business.
What is Crowdfunding?
Crowdfunding is a capital-raising platform which allows a large number of people to place a small amount of money into a new business.
Let me show you how it works.
Let us assume you are trying to raise 100,000 naira capital for your new business. And you know, finding a single investor who will provide the entire money can be challenging.
So, you can easily ask 50 ordinary people to contribute 2,000 naira each to fund your business; which gives you a total of 100,000 naira.
Instead of relying on few wealthy investors, banks, or institutions, you can raise the same amount of capital from contributions of a large group of ordinary people (the crowd).
Entrepreneurs like you have raised hundreds of thousands to millions of naira through crowdfunding. So, what are you waiting for?
Crowd funding can come in form of cooperative societies. Another form of crowd funding is via family members and friends.
Your proposal has to be good enough to convince the crowd. You can start by posting your business idea and proposal on crowdfunding websites.
Examples of crowdfunding sites available in Nigeria are Kickstarter, NaijaFund, Fundanenterprise, CircleUp, MicroVentures, e.t.c.
5. Raise Capital Through Sales of Assets
An asset is any property or thing of value that you own. But, did you know that your assets can be a good source of capital to start your new business?
Yes! Because it could be sold to raise the capital you will need to start up your business or use it as a collateral when applying for a loan.
I don't think there is a point in keeping items you do not need urgently. Why not just sell them off to raise money for the business?
When the business begins to prosper and make good profit, you can always buy those items back.
Raising capital with is method will give you peace of mind and you will never have to worry about paying back along with interest.
You will be able to do your business with peace of mind and grow at your own pace.
Convertible assets include buildings, lands, machineries, cars, jewelries, stocks, bonds and other short/long-term investments, etc.
6. Raise Capital Through Financial Bank Loans
Raising capital through bank loan is the first thing that comes to the mind of every new and aspiring entrepreneurs, Why?
Maybe it's because loans from financial banks has been in existence for a very long time.
To get started with bank loans, first you have to visit a bank not directly for a loan but for other banking services like opening a saving or current account.
As time goes by, you can then be in a position to seek additional banking support like loans and overdraft.
To secure a loan, a commercial bank will require your financial information as a person and as a business. Also, they will require a collateral from you to guarantee and secure the loan.
Bank Loan Requirements for Business in Nigeria
Be ware of these bank loan requirements.
- Purpose of Loan
- Business Plan
- Credit History
- Personal Information
- Financial Statements
- Collateral
- Cash Flow Information on Outstanding Loans and Other Debts.
7. Raise Capital Through Microfinance Banks
Another smart way you can use to raise capital for your new business is through microfinance banks.
Microfinance banks provide financial services for those who don’t have access to conventional banking services.
Through microfinance banks, individuals, groups, organizations, aspiring and existing entrepreneurs can gain access to loans for new business or to facilitate their business growth.
Note that, their loans usually come at a higher interest rate and the loans can be repaid in small installments (weekly or monthly) depending on the terms of your contract.
It is easier to collect a loan from a microfinance bank than commercial banks in Nigeria. All you need to get started is a guarantor.
List of microfinance banks in Nigeria includes; LAPO microfinance bank, AB Microfinance bank, Accion Microfinance bank and so on.
8. Raise Capital Through Government Grants
It is a good news that the government is now paying attention to new businesses and entrepreneurs by providing support.
One of the ways the government support new businesses is by giving out grants.
What is government grants?
A government grant is a financial award given by the government to small business owners.
Grants are free, you won't repay but you can be monitored. Also note that, the government focuses on business sectors that have the potential to impact the economic of the country.
There are several government grants In Nigeria. They include:
- Federal Government Grants for Agriculture
- National Institutes of Health
- Cyber Tipline Grant,
- Bank of Industry (BOI)
- Youwin Connect Nigeria
- Social Intervention Fund of the federal government
- Lagos State Entrepreneurs Trust Fund (LSETF).
9. Raise Capital Through Entrepreneurship Programme like Tony Elumelu
There are a lot of entrepreneurship programmes in Nigeria but I will only focus on Tony Elumelu Entrepreneurship Programme (TEEP).
It is a yearly programme launched by one of Nigeria’s business tycoon Mr. Tony Elumelu via Tony Elumelu Foundation (TEF).
The program launched in 2015 is aimed at providing 10,000 USD seed funding for entrepreneurs across Africa.
Every year, the programme selects 1,000 entrepreneurs across Africa from a pull of over 50,000 applicants.
Each application is carefully reviewed by business experts in the industry and winners are selected based on market feasibility, clear financial models and a capable team to run the business.
Each program begins with an application process opened from January 1st until March 1st.
Click here to start application.
How To Be Eligible:
- Business must be based in Africa
- Business must be for profit
- Business must be 0-3 years’ old
- Applicants must be at least 18 and a legal resident or citizen of an African country.
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