Starting your own business involves risk. You’re taking a massive leap that you believe will ultimately lead to greater success and prosperity. Navigating the world of business to fund your business can feel overwhelming. The way you decide to fund your business is a crucial decision.
The founders of some of the biggest tech companies in the world are extremely well-known. Unfortunately, many people don’t realize how much money those founders received from investors at the start of their business, which includes third parties like banks or angel investors. Let’s take a look at some of the ways startups and small businesses can receive funding to fuel growth and success.
What does funding mean in business?
Business funding happens in numerous ways, it is the obtaining of funds to start, run, and/or grow a business. Entrepreneurs can fund their businesses with personal savings or loans to business grants and investors.
Before Seeking Business Funding
The market a business functions in determines the kind of funding opportunities available. Before you take advantage of the available funding options, you need to position your business for success.
Make sure your company meets the funding requirements
Business funding, apart from personal savings and family loans, depends on the type of business or industry you are in. If you are going to get outside funding or investment, that requires some proof of concept. This proof may come in the form of previous fiscal year revenue and financial records.
Create a business plan
A business plan is a written document that describes the goals and strategies of your business. It typically includes market research, financial statements, funding requirements, management background, and other information about the business.
A good business plan helps you stay focused on your goals and provides you with a blueprint to follow as you build your new company. It can also make it easier to secure loans and grants because lenders will see what you have planned.
Business plans are often used by entrepreneurs who need to raise money from outside investors or banks. However, even if your business isn’t seeking external funding yet, it’s still worth writing a business plan as a way of organizing your thoughts about how your company should grow over time.
Do Some Research
Even with a great business idea, you need to do some research on the industry to learn what the current situation is. Research is an ongoing thing for businesses that want to grow and be successful. The most obvious to mention is using the internet to do your research initially and as an ongoing practice, you may also learn from people who have found success in the business you want to venture into.
Network
In today’s world, the business community is local and digital. In your area, it is great to build a network of people with who you can meet physically and share ideas or even resources.
With online networking, there are forums on social media platforms and business communities like Medium and Substack. So, online networking can open up a lot of opportunities globally and broaden insight into many different aspects of business, funding included.
5 Ways to Get Business Funding
1. Business Incubators
Incubators and accelerators are specialized resources that help business owners to develop and test their products in a controlled environment. An incubator provides the space and equipment necessary to formulate business plans, work on prototypes, and generally work without strict deadlines until the product or idea is ready to pitch. Accelerators help mature businesses grow by guiding how to approach new markets and expand into new territories.
Lea and IED Botswana are an example of business incubators in Botswana.
2. Grants and government funding programs
Grants are ideal because they are money awarded to successful grant applicants and there is no requirement to pay the money back. It is simply an investment in your business to help you succeed, this may come from a funding organization, foundation, or government.
The government runs various grants and funding business programs for specific industries and communities to better the economy. In Botswana, the government runs several specialized grant programs targeting the youth and farming industry.
There are quite a few specialized grant and funding programs available through the Government of Botswana, some of which are the following:
- Arts and Culture Grant
- Poverty Eradication Programme
- Women’s Economic Empowerment Programme
- Youth Development Fund
3. Investors
A venture capitalist (VC) is a private equity investor who invests capital in companies with high growth potential in exchange for an equity stake, on behalf of a client. This could be funding helping a small business expand or startups that do not have access to equities markets.
Here are the types of business investors:
Venture capitalist
A venture capitalist (VC) is a private equity investor who invests capital in companies with high growth potential in exchange for an equity stake, on behalf of a client. This could be funding helping a small business expand or startups that do not have access to equities markets.
Venture capitalists also come with valuable resources and knowledge of the business environment, which use help entrepreneurs succeed.
Angel investors
An angel investor is also known as a private investor, seed investor, or angel funder. An Angel investor is a high-net-worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company. They also differ from venture capitalists by typically investing in newer businesses rather than already established ones.
Angel investors are usually found among an entrepreneur’s family and friends. An angel investor may provide funding as a one-time investment event to help the business get off the ground or an ongoing injection to support the company through the early stages.
For example, Angel investors in Botswana, such as the Angel Network Botswana give the entrepreneurs we invest in access to networks and mentorship intending to build a sustainable business ecosystem.
4. Crowdfunding
Crowdfunding is a large and growing industry with thousands of potential investors and small businesses all vying for attention. However, countless startups, entrepreneurs, and businesses have been successfully funded using these platforms. The key, as always, is to use your creativity in marketing your business and campaign.
The Crowdfunding industry is valued at $20 billion and growing, with an average 22% conversion rate it comes as no surprise that it is popular. Crowdfunding has helped entrepreneurs to grow successful businesses.
Crowdfunding is where everyday people invest or donate a small amount of money into a new business or business idea. These investors are not wealthy investors or venture capitalists, they are individuals who form a crowd of investors, usually done using a digital platform.
There are quite a few crowdfunding platforms, some of which are:
Kickstarter
Kickstarter is a crowdfunding platform that has raised more than $5 Billion since its founding in 2009. The platform has an extensive variety of business types, from publishing, film, and food, tech to game development and music.
Indiegogo
Indiegogo gives entrepreneurs everywhere a platform to launch new and groundbreaking products. The platform helps innovations in tech and design. They are a global crowdfunding platform that can help expand funding opportunities.
5. Loans and Credit
There are a lot of loans and credit facilities available to business owners. FNB is a great example of one of those banks that has an array of business loans and credit options, each with its perks and tailored to specific needs.
Financial institutions offer business solutions depending on the country you are in. Some institutions offer loans to established businesses only and others are willing to take on startups. Having good business credit will always make it easier to secure a business loan. A business loan is a risk also for the lender, thus it goes without saying that the better your business credit the more favorable the payment terms will be.
The Takeaway
There are various options available to the entrepreneur and it is up to the business owner to evaluate those options and pick the one that best suits their small business. However, it’s important to remember that there aren’t any easy options when it comes to raising funds for your business. There will always be a cost involved in one form or another, whether it’s time spent searching for sources of capital, or giving up a part of your business when you accept outside funding.
