When you mention capital, most young people think of cash. While this is the most common form of capital, it is not necessary the most important. Start-up capital is the idea that you have. There is no greater asset when you are starting out than your idea. With a solid idea, you don’t need to wait for a million shilling to start a business. A determined entrepreneur should be armed with his idea, a little contribution from family friends and personal saving and great Focus.
When you start your business, the biggest challenge is always the operating/growth capital. Growth or operating capital is the assets or money you need for day to day operations. Most of the time you find the creditors have not paid in time which means your cash is disrupted, but the business has to continue running. Here are some ways that you can raise operating capital:
1. Strategic Partner
When your business has gained traction and you understand the field, you can look for a partner who has the financial capabilities in exchange for a stake in the company. However, the partner or partners you bring on board must share your goals and vision. Even if they bring to the table a billion dollars and you don’t share the same vision and goals, you will not go far.
A partner must believe in the business or make it a better. He must be someone who believes in your abilities and respects the goals and targets you have set out for the company. What do you see when you look in the future? Do both of you see the same thing or everyone has their own translation and opinion? Your business partner should be a hard worker and not only invest money but also time in the business.
2. Banks and traditional lenders
Small business loans from traditional lenders (banks) can offer surprisingly great terms and better interest rates. Of course, this depends on your credit profile and the type of collateral you offer. This is the reason why you need to have a well-crafted business plan in place. From a traditional standpoint, this is your best bet for getting capital and you can help optimize your credit score at the same time. Plus, securing this loan helps other investors see that you’re a ‘real company’. You can apply for temporary overdraft if you can securities and fixed assets.
3. Crowdfunding
If for one reason or another you don’t qualify for a small business loan, there is the option of crowdfunding capital from friends and family. You can also approach a company aligned to your vision for a strategic partnership which will save you cash. Do your research and select a reputable company with a consistent success rate. This is a less orthodox approach, but it works for many people in your position. Just make sure you carefully look at the terms and interest rates and perhaps have a legal advisor chime in.
4. Investments companies and angel investors
This is the cream of the crop and the most difficult to secure. Some investment companies have very clear directions for investing while others will basically come to you as if by magic. To pique the interest of these lucrative investors, it’s all about PR and marketing even at this level. You might be exactly what they’re looking for, but your presentation skills, content, your business model will determine whether you secure funding or not.
By Eric Kinoti
CEO, Shade Systems
