5 Ways To Fund Your New Business

So many times, you often hear people ask: what is the best way to fund a new business venture? And the simple answer is that there is no best way to fund a new business venture.

The honest truth is there are a lot of ways to finance a new business and the one that suits you best depends on your market, product, your financial requirements and most importantly, your personal and financial situation.

Having that in mind, listed below are a few of the most common ways to fund a new business. Please bearing mind that all methods have pros and cons and some (or most) may not work based on your specific situation. Irrespective of the funding method you choose, kindly take out time to thoroughly investigate the ups and downs and don’t jump in with both feet until you’re sure you’ll land on solid ground.

#1 Funds From Savings and Investments

I’m a huge fan of self-funding when it comes to business because it doesn’t make you responsible to others should the business fail. The first source you should consider tapping into is your own personal savings and investments.  The sad thing is that should things go wrong, it will be your money that goes down with the ship. If you are not ready to risk your own money, you certainly shouldn’t be ready to risk anyone else’s.

#2 Funds From Friends and Family

After tapping their own savings and investments, many entrepreneurs would often seek help from friends and family. This sometimes works well for some people, but here is the creed I live by: “NEVER borrow money from anyone you have to eat with on the same dinning table”. And notice I said "lending money" rather than investing money. Venture capitalists invest money while your relatives lend you money and they will definitely expect it back someday even if they told you they won’t. Always remember that when a loved one invests in your business they are investing in you with emotions. 

#3 Funds From Mortgage

In our country today, bank loans are next to impossible to get if you don’t have collateral and a track record of business success, and this is the reason why so many entrepreneurs use the equity in their homes to finance their business after being turned down for a loan from their banks. The problem with mortgage is that you must pay this money back whether your business becomes successful or not, but it is also a good source of low interest money to get you started.

#4 Funds From Angel Investors

An angel investor as the name would imply is typically a wealthy individual who would invest in startup ventures with the aim of owning a percentage of the business.  They are usually the first formal investors in a business and they provide the SEED money to get the business up and running. Most angel investors would normally write you a check and leave you alone to run the business while others might consider their investment as a license to "help you" manage and make certain decisions. If you ever consider accepting an accept angel investor’s money, always make sure the terms are clearly spelled out on both sides. Angel money always comes with strings so make sure you know if those strings come in the form of a bow or a noose before you accept an angel’s check.

#5 Funds From Venture Capitalists

Venture capitalists are to angel investors as pit bulls are to Chihuahuas but this is not to say that all Venture Capitalist are bad dogs, but they surely have powerful jaws that can chew up your business and spit it out if things do not seem to go their way. Venture Capitalist\s money doesn’t come with strings but it comes with chains and locks and lots of legal documents. Venture Capitalists normally have the upper hand in any deal they put their money in. That is just how the system works and that’s the price you pay to get access to VC money.

If your business gets to the level that Venture Capitalist’s money becomes a viable option, please do not jump at the first bone a Venture Capitalist throws at you. If one Venture Capitalist likes your idea that means others will, too. Present your idea to multiple VC and carefully consider each offer before you accept the check.

Just remember, no matter how you finance your business, use the money wisely. Don’t buy N200,000 laptop and N100,000 handset.

I will love to hear from you, kindly leave your comments below and as usual, remember to share this post with your friends and love ones using any of the buttons below. You just might help someone startup a business today.

To successful in funding your business!