How to Find Money to Start Your Small Business in Kenya

How to Find Money to Start Your Small Business in Kenya


Most people have great business ideas but cannot get their businesses up and running because they lack the finances to do that.

Capitals vary depending on the type of business. You can start a business with 10 dollars or 100 dollars.

Commercial Capital LLC says that, for most entrepreneurs, finding the money to start their small businesses is usually one of the first problems they face.

If your business requires a good amount of money to hit the ground, sourcing its capital can be very hard and frustrating.

Experts say looking for the money in the wrong place and with off the beam, expectations makes the whole process more frustrating.

Sourcing for capital to start your small business is one journey that requires hard work and patience more than anything.

Dave Lavinsky on Growthink says it’s crucial for an entrepreneur to know when, where, and how to acquire the funds they need.

However, most aspiring entrepreneurs just have a rough idea of how to go around and get some funds. Some end up obtaining finances from the wrong sources or approach the process blindly and this ends up costing their business money and time.

There are so many potential options for financing small businesses you could choose from. But, you need to understand these options and choose the best and convenient option for you and your business.  

Sources to obtain funding for your Small Business.

Before you even start looking for funds to finance your small business, you need to have a solid business plan. In this business plan, ensure you explain every important detail about your business and the strategy you have for your business in order to succeed. Obtaining money being your next main goal, make sure you determine how much money you need and indicating what you need it for.

Knowing how much you need will guide you into the sources you need to approach. It will also give you a picture of what needs to be financed first.

1.Your Savings.

You should be the first person to invest in your business. Before you start approaching other people to finance your small business, look at yourself first.

As an aspiring entrepreneur, you have definitely had your business idea for a while and have had the plan to start your business. This means you already have a clue of how much your business needs to start.

Assess how much money you have and understand your financial health. Look at your savings accounts and see how much you have and how much you are willing to risk.

If you currently don’t have enough money to start your small business, plan to save. This gives you the liberty to plan and the liberty of time-saving for as long as you want. You will know when you have saved enough and then you can get your business off the ground.

Financing your small business yourself gives you a great advantage that doesn’t come when getting funding from other people. You are the one in control and you don’t have investors to justify yourself to. However, with this comes a factor that might disadvantage you – having little money since you give your business what you are able to give it. But, that should not stop you.  

Equity Vs. Debt Financing

The following sources are through Other People’s Money (OPM) and come as equity or in form of debt or a loan.

With Equity financing, you sell a part of your stock to your financier or a buyer and they get an ownership interest in your business.

Debt financing on the other hand is a loan you get and repay when your business starts to increase in profits.

2.Family and Friends.

This is another easy and common option to find funding for your business but should be approached with caution.

Commercial Capital LLC cautions that in any startup business, its guaranteed things might go south at any point. And, if things go south in your business, your relationship with family or friends who invested in your business is highly going to be affected.   

When you start your business with funding from your family or friends, you have two options, equity or loan. Some family members or friends might want to have equity in your business as a way of repaying them. With equity, they become an owner in your business and share the profits it brings in. Being in business with family or friends is not an easy thing and before you choose this option, be aware of all the drawbacks.

However, instead of giving them equity, consider taking the money as a loan and you can repay them when your business increases in profits.

If finding funding from family or friends is your option, make sure you have a formal or legal agreement. Additionally, learn to treat all investors professionally family or not.

3.Small Business Administrators.

SBAs have many programs for financing small businesses as long as there is a guarantee the loan will be repaid.

SBAs generally offer loans to small businesses that are not able to obtain financing through normal channels. These loans come in reasonable terms that accommodate most small businesses.

Traditional lenders such as micro-financing institutions, SACCOs, and some banks fall under SBAs.

In some cases, these loans come with business training which is really beneficial to first-time business owners.

4.Bank loans.

This is another common funding option for many small businesses and most business gurus recommend bank loans. However, most aspiring small business owners have a challenge in getting loans from banks.

Banks only offer loans against assets or collateral and most small business owners don’t have assets for security. Therefore, if you have personal assets you could use, this option will work for you.

However, depending on the bank, there might be other ways you can prove to the bank you are able to repay the loan such as a satisfactory cosigner or a guarantor. Different banks have different loan requirements when it comes to small business loans.

With this option, you don’t need to give equity to the bank as you repay in principal and interest.

5.Business Incubators.

These are common in many regions and are great for your business when you get lucky to be in one.

Business incubators focus on providing support to new and small businesses as they develop.

Most of the time, these business incubators scout for small businesses and reach out to them. On the other hand, you can personally reach out to these incubators and pitch your idea. If they are impressed with your business idea, your plan, and strategy they chip-in in different areas of your business.

6.Angel Investors.

Angel investors are great but not so common to many small businesses. Commercial Capital LLC says they are just like family and friends only that you don’t know them yet.

With angel investors, you have to purposefully and strategically find them. They are successful individuals, other business owners, or retired executives with the means and ability to finance small businesses they have an interest in.

And, most of these individuals are only found in networking events, industry events and that means you have to put yourself out there. Network as much as possible in order to find them.

This funding option is not for the faint-hearted and needs a lot of sacrifices, hard work, and endurance to accept NOs.

There are other financing options but these are more inclined to a specific type of start-ups thus are not very common for most small businesses. They include government grants and subsidies, venture capitals, crowdfunding, cloud funding, ACH loans, and merchant advances.

Final Thoughts…

If you can’t obtain the money you need for your business, you cannot build the business you want.

With so many options available, choosing the right funding source is very crucial. Some sources are complicated in terms of relations, terms, and conditions while others might not offer you what you need especially in terms of amounts.

So, before you settle on a source, do your due diligence and get to know what comes with each option.  Get to know what good and what drawbacks come with each financing option you are considering.

The right source will help you meet the goals you have for your business and grow your business to its limits.

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