As long as humans continue to exist on the planet earth, and as long as the consumption of goods and services are needed for their survival, the art of business will never cease.
Thus, the economy of a nation can be weighed on the premises of the volume of active businesses carried out within her.
It is no news that unemployment, a post-pandemic nightmare, is on the rise globally, especially in developing countries.
As a result, governments seek to empower their citizens, such that they can have the ability and needed aid to establish businesses as entrepreneurs, rather than keep seeking white-collar jobs.
To start a business, an entrepreneur must first identify a need (goods or services) of his intended customers, which he or she is capable of and intending to meet.
He then draws out a business plan, from which he, through the use of the needed factors of production, meets the desired need.
Capital: The wheel of business
Of the various factors of production, the vital one is capital. As a matter of fact, capital is used to acquire and maintain the other factors of production like labour, land etc.
In essence, funds are like flying horses that take a business from the dreamworld of ideas to the desired utopia. Executing business plans gets easier when funds are available.
Most often, either as a beginner in business, or as an expert, there comes a time when a business might need funds from external sources, either to expand, execute some new plans, or save the business from collapse.
There is a need to know about the available sources of funds for businesses, their modes of operations, terms and conditions, before you cautiously choose a suitable source of fund for your business, so as to avoid setbacks.
Sources of Funds for your business
If you are looking for available sources of funds for your business, you might consider any of the options below:
Funds, made available in form of loans can be obtained from a bank. Most banks offer loans to their customers to do business.
The customer, upon obtaining the loan, pays back in installments, over an agreed period of time.
A percentage of the given capital is paid back as interest. The bank requests for documents of any of the customer’s assets, as collateral, whose ownership might be forfeited in the event of failure to pay back the loan.
However, the bank does not interfere with the customer’s business; all it concerns itself with is the payment of the loan. As soon as the loan is repaid, the customer has no obligation to the bank.
An investor is another available source of fund. This is done by offering shares of the business for sale to the public.
This is known as initial public offering. An investor buys shares and becomes a joint owner of the business, known as shareholders.
Funds got from the sales of shares are not refundable or paid back like a loan from a bank, thus are used entirely and conveniently for running the business.
However, an investor shares from dividends of the business, as well as its liabilities. An unlikely risk, one not to be ignored, is the fact that proper legal frameworks must be put in place, to manage share sales as to prevent an unforeseen takeover, since the volume of shares possessed by an individual is their amount of ownership.
Whether it is a bank or an investor, there are pros and cons. Every great decision comes with a price.
So is the saying that, “no risk, no reward”. However, this defining moment is the difference between average businesses and the big guns.
Thinking of funding your business? Find what is suitable for your business, and consult the services of professionals to guide you through the necessary procedures.
Don’t miss important articles during the week. Subscribe to techbuild.africa weekly digest for updates.