So you’ve started your start-up business, you saved money for expenses, stock and you’re doing pretty well the first month. Then the second month turns out not so good, you didn’t reach your sales goal, the expenses are piling up and you don’t have enough money. You struggle on through the second month, but the third month turns a bit worse than the second one and now you’re not too sure you’re going to make it past the third month. Expenses are still too high and piling up and you don’t seem to have enough cash to stretch for all your needs. What to do?
Sound familiar? I know for me it definitely is; in business it’s very imperative to plan and budget. However, plans don’t always go as you wrote them down. Sometimes that budget is still understated, no matter how hard you tried to anticipate your costs; so how do you solve all those problems? You can’t quit (I mean after all, you are an entrepreneur – Quit just isn’t in your vocabulary!) You find a way out, you fund raise to get that money. Here are a few ideas that are truly helpful for a small business youth entrepreneur in Kenya.
1. Friends and Family Members.
If you haven’t already when starting your business, ask for funds from close relatives and friends. However, don’t just ask for cash for free and not bother updating them on the progress of your business. Treat all the funds given as an investment, if the individual has any skills that can help you in your business, utilize them. Include them as a shareholder in your company or even a director if they qualify for the part. Have an agreement on the part they play in your business e.g. Shareholder, Director, Investor etc. All this will save you from any uncomfortable situations in the future that may arise when it comes to the business.
2. Bank Loans
If your start-up has been operational for a while and you have a Bank account (if you don’t have a business bank account – go start one now!) that has been active for a while, at least over 6 months. You can get a small business bank loan to boost your business; it also helps your business build credit with your bank which is good for future (and bigger) loans. The first time they lend you capital will be a small manageable amount, but it will be helpful and it gets you started on building a good line of credit. Make sure the amount you request is manageable and you’ll be able to make your monthly payment based on the sales you make or plan on making.
A good example of a great lending bank is Equity Bank Ltd, they are our current business account bank. They give great loans based on your business (small, medium or large business) or other demographic (e.g. youth or women loans) and they are very efficient on approving and giving you the money.
3. Angel Investors
This is still a young concept in Kenya but it’s slowly gaining popularity as our economy is fast-growing and more investors are willing to take a chance on Kenyan businesses. Angel investors are very wealthy individuals that provide capital for business start-ups in exchange for ownership equity (i.e. a percent of shares in your company) or convertible equity debt. There are specific individuals in Kenya who have chosen to be angels in particular industries, especially in the tech sector. There are also angels that come together and create networks or organizations who fund specific industries and areas in Africa such as Seed Capital Investment or Angel Capital Ltd.
If you check out these organizations and your business is in their target range, you can contact them and see how you can get funding. You can also search out any Angel investor individuals in your particular industry and approach them with a well-defined and professional proposal for funding your particular start-up.
I hope these tips are helpful in your fundraising efforts, if you have any other ideas please share them below. I love feed back and any other input you have ^_^