Funding options in Entrepreneurship.

.

• Most entrepreneurs who start up a business need to provide the finance for starting their business themselves.• They would do this from their personal savings or

cashing in any investments they may have. The advantage of is that your business and all its decisions remain in your control.• The disadvantage – you may not be able to access all

resources and if something goes wrong with the business, you stand to lose your life’s savings.

Personal Savings

When you take a loan, you raise funds for your business by incurring debt. The repayments are linked to what is known as the prime lending rate, if you raise a loan from a commercial bank. (17% to 27%).

The problem with bank loans is that they require security – they require collateral in the form of fixed property or investments.

If you do not pay repay your loan as agreed, they take over your assets to cover the outstanding loan amount.

Loans

When considering granting a loan, some of the things banks look at are:-

The number of years in business. Your track record is very important. Banks usually require three years, while other lenders may be less stringent.

The size of your company and the amount of money needed.

Not all banks charge the same interest rate. Some have more flexible packages, so you need to do your homework & research where your best option lies.

Loans

• Some of the reasons for banks turning down loan applications include:

The business plan does not include enough information, particularly financial information.

The business is not regarded as being sustainable.The loan requested is not justifiedThe applicant does not have sufficient collateralPoor credit record of the applicant

Loans

• Equity is where the money raised gives the investor a stake in your business. This results in the investor having a share in the profits.• Before deciding to raise finance in this way,

consider carefully whether you are prepared to share your hard earned profits and whether you are prepared to give someone else a say in the running of your business.

Equity funding

• Small Industries Development Organisation (SIDO).• Promotion of Rural Initiatives and Development

Enterprises Limited (PRIDE).• FAIDIKA etc. etc.

Others