Getting a small business off the ground is challenging, especially without much finance. There are various ways to fund a small business.
Here are a few ways you can access to the capital you need:
Self-funding: Most privately-owned businesses tend to start with funds raised internally. Many small business owners take a risk by financing their businesses using their own bank accounts. This gives the advantage of having direct access to money. A disadvantage may be that personal finances are tied up with business funds. A simple way of avoiding confusion is to open a separate business account. It’s important to keep business records as a separate entity.
Angel investors: “Angel investment” is a popular form of funding. A wealthy investor provides the seed capital required to start the business. This is usually in exchange for a stake of the profits or as a loan that must be repaid with interest. Investors may be individuals or a network and the degree of control varies. Some investors want to remain uninvolved in business operations while others may want to mentor or have some involvement in management decisions. Make sure that the agreement is made clear in writing.
Venture Capitalist:Venture capitalists look specifically for start-ups to fund. A benefit that comes with this option is that a large amount of money is made available. Venture capitalists usually seek businesses that are more stable. This may mean that business owners may need to give up a bit more control of the business.
Government Grants:Governments are often willing to help small business owners through a number of grants, loans and tenders. This funding is usually designated for businesses with the necessary BEE accreditation, tax clearance and documentation.
Bootstrapping:By keeping overheads to a minimum, you may be able to get the business operational as quickly as possible. There is no reliance on outside funding, but rather just on working smart and being financially prudent to get the necessary funds.