Sources of Capital to Start a Business

A lack of or limited capital is often cited by a significant number of ‘potential’ entrepreneurs as a barrier to the realisation of their business dreams. Unfortunately, the harsh fact is that capital, like all other resources is limited. Therefore, it is only entrepreneurs that are creative, persistent and think out of the box in pursuit of this resource that are able to get what they are looking for.
The good news, we know some possible sources that you could make use of. In this article, we summarise a few of these that you can approach to get the capital to help you kick start your business. But before we start, here are a few things you need to have ready:

  • Your business plan or a summary of your business plan. Your business plan spells out your vision, how you plan to get there and what you will need to get there. Most possible investors will know what they are investing in and whether it will work. Your business plan should be able to communicate to this effect.

Check out our article on how to write a business plan.

  • Register your company. Contrary to what many people think, it is not hard to register your company. Registering your company gives the impression that you are serious. Besides, most would be investors would like to know that they are dealing with a legally recognized institution before they put in their money.

Check out our article on why you need to register your company.

  • Have a repayment plan ready. Most potential investors would like to know what your repayment plan is before they give you their money. Your repayment plan should detail the amount of money you require, how you plan to pay back, how long it will take you and the installments.

Now, we go into the possible sources of capital for your business

1. Family, friends, colleagues

These are easier to convince since they already are aware of your vision and potential. Reach out to them and let them know what your need is. You could also share with them your business plan. Explain to them your repayment plan. One critical point to remember is that when you promise to pay back, do just that. Remember that these people believe in you and are ready to stand by you and the least you can do is to honour your agreement.

2. Bank loan

This is a more straight forward way of accessing capital. Find out which Banks are providing the kind of service you need and contact them. Each Bank has a different package and it is important that you explore several packages before you chose what serves your interests at a low cost.

Do not shy away from visiting the Bank you have in mind and inquiring about the service that you seek. This will enable you to obtain firsthand information on the Bank requirements and the different packages available.

3. Individual lenders

These can be your acquaintances, friends of your friend or individuals who provide informal loan services. We discourage you from using this particular source because of the disadvantages such as very high interest rates and the fact that in these kinds of dealings, you are not protected by the law and can be easily exploited.

4. Government

Most governments run youth employability programmes and some of these provide venture capital to start-ups. Find out what programmes the government has in place and how you can exploit them and the requirements to access the available resources.
Whatever option you opt for, remember that it takes preparation, persistence and hardwork.

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