Top 7 Sources of Funding For Businesses
Do you have a business idea, but don’t have the capital to start up and don’t know where to source funding? if yes, then you are at the right place as we will be walking you through the Top 7 Sources of Funding For Businesses, so keep reading.
Before starting a business, every entrepreneur thinks about its funding. Essentially, the funding of any business is critical to its success and growth. This is because every business requires money to function properly. Fortunately, there are numerous sources of business funding from which to choose.
Before we move further, let’s understand what Sources of Funding are all about.
What are Sources of Funding?
As previously stated, entrepreneurs always seek funding to start or grow their businesses. The act of donating resources to sponsor a program need or project is referred to as funding. Essentially, entrepreneurs can seek funding for their businesses for either short-term or long-term purposes.
You may also want to read Full List Of Federal Government Grants To Apply in 2022
What To Consider Before Looking For Funding For Your Business
You must first create a solid business plan before seeking funding. You should specify how much money you need for your business and how you intend to allocate it. You must also clearly explain your company’s success strategy.
Furthermore, you must comprehend the funding’s business timing. For example, do you prefer to receive all of the funding at once or in stages?
The type of funding you should pursue is ultimately determined by the amount of funding you require for your business. For example, if you need N3,000,000 in funding, angel investors are more advantageous than venture capitalists. If you need a large sum of money, venture capitalists are a better option.
Top 7 Sources of Funding for Businesses
Below are the top 7 common sources of funding for businesses
1. Personal Investment
You should be the first investor in a new business. You can start your business with your own money or with collateral on your assets. Essentially, this shows investors that you are committed to your project and willing to take risks.
2. Venture Capital
All entrepreneurs do not require venture capital. Essentially, venture capitalists prefer to fund technology-driven businesses and organizations with high growth potential. Sectors with high growth potential include communications, information technology, and biotechnology.
Venture capitalists buy stock in your company in order to help it carry out a high-risk project. As a result, choosing this type of funding entails giving up some ownership or shares in your company to an outside party.
Furthermore, venture capitalists expect you to provide a healthy return on their investment, which is typically obtained by selling shares to the general public. If you decide to pursue this type of funding, make sure to find investors with relevant experience and knowledge of your business.
3. Angel Investors
Angel investors have typically retired executives or wealthy individuals who prefer to make direct investments in small businesses owned by others. They are usually managers in their own field who make significant contributions to the field. Typically, investments are used to fund the early stages of a business.
Angels reserve the right to oversee your company’s management practices in exchange for financing your business. In practice, this entails offering them a seat on the board of directors in exchange for funding. You must also assure them that everything you do is transparent.
Angels will most likely keep a low profile. As a result, in order to meet them, you must contact specialized organizations or search angel-related websites.
You may also want to read List Of USSD Codes To Get Bank & Online Loans in Nigeria
4. Love Money
Love money is any money borrowed from your spouse, friends, parents, or family. You will be required to repay this loan as your company grows and profits increase. Here are some things to keep in mind if you decide to use live money:
- Family and friends hardly have much capital
- They may decide to have shares in your business
- Lastly, do not take a business relationship with family or friends lightly.
5. Business Incubators
Business incubators, also known as accelerators, generally focus on the high-tech sector, assisting new businesses at various stages of development. There are, however, local economic development incubators that share resources in areas such as job creation, revitalization, and hosting and sharing services.
In general, incubators will invite prospective businesses and other start-ups to share their logical, administrative, and technical resources. For example, an incubator may share the use of its laboratories with a new business, allowing it to develop and test its products at a low cost before beginning production.
6. Government Grants and Subsidies
Government agencies are organizations that provide funding, such as subsidies and grants, to businesses. In general, there are various grants available in Nigeria. Some are refundable, while others are non-refundable.
Some Government Grants To Apply in Nigeria
- CBN Creative Industry Financing Initiative
- Government Enterprise and Empowerment Program (GEEP)
- Lagos State MSME Recovery Fund 2.0
- GroFin Fund
- Nirsal Microfinance Bank Covid-19 TCF Loan
7. Loans From Banks
Bank loans are one of the most common types of business financing. You simply need to shop around and compare your options to find the best bank for you. Also, keep in mind that different banks provide different benefits, so it all depends on what you’re looking for.
In general, banks are looking for businesses that have a good track record and are not in debt. To obtain a bank loan, you must have not only a good idea but also a solid business plan.
Nigerians have access to a variety of business funding options. As a result, you don’t have to be concerned about capital for your business. You will find a comprehensive list of all the different types of business funding available to you above. Just make sure you choose the best one for your requirements.
Using this platform, you can obtain a comprehensive loan that is tailored to your specific needs. Essentially, it allows you to compare loans from various lenders across Africa, ensuring that the best option is not overlooked.
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