Running a business is one of the most promising ways to earn a higher income. It gives owners flexibility in terms of time and earning potential. And that could be the major reason why thousands of small enterprises open each year.
However, many aspiring and small-time entrepreneurs have a common problem, and that is how to raise enough capital to get their business off the ground. Lack of proper financing is the most common reason why small business enterprises close down even during the first few years of operation.
The good news is there are several ways to get the money you need for your small self-employed business. All these are discussed below:
1. Apply For Loans
One of the best and easy ways to finance a small company is by getting a self employed business loan. This involves borrowing money from financial lending institutions like banks, online platforms, and others.
The borrowed money is known as the principal amount and must be refunded together with the accrued interest in equal monthly installments. But before you apply for the loan, you must make sure that you qualify.
For instance, some lending companies will give you a loan only if you have a good credit score. Besides, they’ll want to see your business plan before they consider approving your loan. Therefore, ensure your credit score is in good standing and prepare a comprehensive business plan before you apply for the loan. A good credit score and a sound business proposal will increase your chances of getting the loan approved.
2. Utilize Your Own Money Savings
This is one of the most effective ways to raise business capital since you won’t attract any interest. While that’s the case, you shouldn’t use all your savings to finance your enterprise. Ensure you leave some money in your bank account for emergencies and personal expenses like food, monthly bills, entertainment, transport, etc. That’s important since most small enterprises aren’t profitable for a while after opening. Therefore, you should still set aside enough cash to support you all this time.
If you don’t have enough savings to finance your small business, you can consider disposing of some of your properties for cash. For instance, you can sell a piece of land, motor vehicles, gadgets, or any other high-value items you no longer use at your home. The idea here is to generate enough money to jumpstart your firm.
3. Ask For Financial Aid From Relatives And Friends
If you have a strong support network, then this could be feasible. The best thing about asking for financial aid from close friends and relatives is that the repayment terms can be more flexible and you don’t have to worry about crippling interest rates.
Since you can negotiate favorable repayment schedules, you won’t be too pressured to aggressively raise money—especially during the first few months of your business. If your friends or family members are very supportive, then you can offer for them to be a capital partner or investor in the business. This means they’ll get a share of the profits that is commensurate to the money they contributed to your capital.
4. Apply For Government Grants
Government grants are perhaps the cheapest way of finding capital for a small self-employed business. The best thing about government grants is that they aren’t refundable. Due to the non-refundable nature of government grants, this option is very competitive. But still, you can qualify for it if you meet all the requirements.
For instance, you must prove that your company operates in the best interest of the larger community or society. A promising or revolutionary business idea could easily land you a grant as well.
5. Partner With Venture Capitalists And Angel Investors
Raising capital from venture capitalists and angel investors is another way to finance a small business. These people lend their money to companies with high growth potential in exchange for equity. Therefore, expect to lose some shareholdings in your company when you go with this option.
You’ll need a good business idea to attract these investors. Besides, just like lending institutions, most of these people will require you to have a solid business plan before they go ahead and decide on investing in your business.
Small self-employed businesses face a lot of challenges. Apart from stiff competition, raising enough capital to establish the business and keep it afloat for some time is a huge challenge. However, aspiring business owners can utilize the methods discussed above to raise capital. This includes getting a loan from financial institutions, raising capital from supportive friends or family members, applying for government grants, and more.
It is also important to remember that you can raise capital in more than just one way. So, aside from using your savings, you can also try to apply for a government grant to acquire a more substantial capital.
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