If you are from Africa, you already understand how difficult it is to get fundraising for your new business. A new business requires capital to help support operations, marketing, business expansion, product development, and talent acquisition. All of this capital requirement needs financial support and that could be a problem for so many people.
Imagine how frustrating it will be when there is no financial support for this new groundbreaking business idea of yours, the aim of this write-up today is to discuss the possible pros and cons of the available options for business owners to raise capital.
Bootstrapping This is the launch and the expansion of a startup without having to rely on any external help for funds. This process involves the use of personal savings or resources, it could be savings from previous jobs, from an existing source of income, or retirement funds.
The advantages of bootstrapping include; the encouragement of financial discipline because when people use their savings, they tend to be more careful with the way they spend. Also, these new business owners are accountable to only themselves there will be no need for external investors.
The disadvantage of bootstrapping is that a lower amount is often raised when compared to other methods of fundraising.
Financing from friends and family: This is a form of financing where you get to raise funds from close relatives and people within your circle. This is also one of the early methods of fundraising for entrepreneurs especially when finances from other sources are unavailable. With this system comes the advantage of speed and ease of access. On the other hand, a strained relationship could create train relationships amongst family members and friends.
Loans: Loans can be obtained from the bank, these loans will come with interest over a particular time, and for banks to give out loans there has to be a form of collateral and a passed increase of credit history. The disadvantage however is that not so many people can meet required loan obligations, and the interest rate may also be very high.
Grants: Several government organizations and institutions organize funds for business owners, these grants are usually awarded based on different set criteria, and unlike loans, there is usually no interest rate added to it.
The advantage is that some of the grants are non-refundable loans, this will limit the financial pressure on business owners and allow them to focus on business growth.
Some grants may be short-term based, which may create pressures on funding as time goes on.
Even as Africans, there are ways to raise business funds, it may not be easy but it is still attainable, there are still several other means that I may bring to your attention in my next post.