The
task of raising money for a business is not as difficult as most people seem to
think. This is especially true when you have an idea that can make you and your
backers rich. Actually, there's more money available for new business ventures
than there are good business ideas.
A
very important rule of the game to learn: Anytime you want to raise money, your
first move should be to put together a proper prospectus.
This
prospectus should include a resume of your background, your education,
training, experience and any other personal qualities that might be counted as
an asset to your potential success. It's also a good idea to list the various
loans you've had in the past, what they were for, and your history in paying
them off. You'll have to explain in detail how the money you want is going to
be used. If it's for an existing business, you'll need a profit and loss record
for at least the preceding six months, and a plan showing how this additional
money will produce greater profits. If it's a new business, you'll have to show
your proposed business plan, your marketing research and projected costs, as well
as anticipated income figures, with a summary for each year, over at least a
three year period.
It'll
be advantageous to you to base your cost estimates high, and your income
projections on minimal returns. This will enable you to "ride thru"
those extreme "ups and downs" inherent in any beginning business. You
should also describe what makes your business unique-- how it differs from your
competition, and the opportunities for expansion or secondary products. This
prospectus will have to state precisely what you're offering the investor in
return for the use of his money. He'll want to know the percentage of interest
you're willing to pay, and whether monthly, quarterly or on an annual basis.
Are you offering a certain percentage of the profits? A percentage of the business?
A seat on your board of directors?
An
investor uses his money to make more money. He wants to make as much as he can,
regardless whether it's a short term or long term deal. In order to attract
him, interest him, and persuade him to "put up" the money you need,
you'll not only have to offer him an opportunity for big profits, but you'll
have to spell it out in detail, and further, back up your claims with proof
from your marketing research.
Venture
investors are usually quite familiar with "high risk" proposals, yet
they all want to minimize that risk as much as possible. Therefore, your
prospectus should include a listing of your business and personal assets with
documentation – usually copies of your tax returns for the past three years or
more. Your prospective investor may not know anything about you or your business,
but if he wants to know, he can pick up his telephone and know everything there
is to know within 24 hours. The point here is, don't ever try to "con"
a potential investor. Be honest with him. Lay all the facts on the table for
him. In most cases, if you've got a good idea and you've done your homework properly,
an "interested investor" will understand your position and offer more
help than you dared to ask.
When
you have your prospectus prepared, know how much money you want, exactly how it
will be used, and how you intend to repay it, you're ready to start looking for
investors.
As
simple as it seems, one of the easiest ways of raising money is by advertising
in a newspaper or a national publication featuring such ads. Your ad should
state the amount of money you want - always ask for more money than you need so
you have room for negotiating. Your ad should also state the type of business
involved (to separate the curious from the truly interested), and the kind of
return you're promising on the investment.
Disregard
the stories you hear of "tight money," and start making phone calls,
talking to people, and making appointments to discuss your plans with the
people who have money to invest. There's more money now than there's ever been
for new business investment. The problem is that most beginning "business
builders" don't know what to believe or which way to turn for help. They
tend to believe the stories of "tight money," and they set aside
their plans for a business of their own until a time when start-up money might
be easier to find.
The
truth is this: Now is the time to make your move. Now is the time to act. The
person with a truly viable business plan, and determination to succeed, will
make use of every possible idea that can be imagined. And the ideas I've
suggested here should serve as just a few of the unlimited sources of monetary
help available and waiting for you!
WINNING
WAYS FOR FUNDING YOUR BUSINESS
Looking
for funding to start your business can be a quite experience, especially if you
don't know the right sources, this resource manual has therefore explore the
various opportunities that are available to you. The manual will explore
various funding windows, in both the local and foreign donor agencies
1.
MAKING USE OF FEDERAL GOVERNMENT POVERTY ERADICATION SCHEME:
It
is exactly aimed at co-coordinating, monitoring and ensuring collaboration
about programme that would eradicate poverty in Nigeria, their is programmes
like "YES" i.e. Youth Empowerment Scheme, which has two sections. One
is CAP, Capacity Acquisition Programme for non-graduates and the other is MAP,
Managed Attachment Programme for graduates, where they attach graduates to some
organizations and they give them allowance. As of now NAPEP is collaborating
with Dangote Group of Companies. The programme is referred to as Dangote-NAPEP
collaboration. The graduates under this scheme help Dangote to market its
products that idea of having private sector comes into NAPEP to collaborate is
in line with the reform programme of Federal Government, which is to collaborate
in certain areas, especially poverty alleviation.
You can
kick start your business with these varying opportunities NAPEP has to offer.
Development center are created in different parts of the country where people
are trained in different vocations like catering, hair dressing, shoe-making, fashion
designing, mechanic etc, they all fall under CAP. At the development centres
they supply items like computers, sewing machines, dryers etc resettle them by
giving them a start off loan so that they will become employers of labour. They
have offices in each of the local government of the federation
2.
FRIENDS AND RELATIVES
If
they believe in you and your idea, friends and relatives are sometimes willing
to fund you. Choose this route with care and ensure you execute a formal loan
document stating loan terms (interest, terms of repayment)
3.
LIFE INSURANCE
Some
types of life insurance policies have cash value, which can be borrowed at very
low interest. You are not obligated to pay this money back but if you don't
your policy payout is reduced by the amount borrowed
4.
LEASING
Unlike
loan, leasing is like long-term rental. At the end of the lease, you don't
automatically own the asset; you have the option to buy it at its residual
value. A lease requires little or no money down and is an alternative to
purchasing such item as cars machinery or office equipment. By leasing instead
of buying, your business can usually write off the monthly lease expenses
5.
APPROACHING MONEY LENDERS
This
form of lending is very popular and vital to small business development. A
lender incurs risk and charges a corresponding rate of interest based on that
risk. The lender usually assesses a variety of factors such as the strength of
your business plan, and your personal credit history. In Nigeria, a lot of
people have set up this type of business venture, the payback period does not always
exceed 12 months, and they receive collateral like Cars, C of O's radio, TV
etc.
6.
GOING PUBLIC
Once
again this option is available primarily to fast-growth companies. This is when
you offer and sell equity interests in the company (e.g. shares) through a
stock exchange or broker network. Going public involves a rigorous process of
regulatory compliance and promotion.
7.
JOINING A COOPERATIVE SOCIETY
They
are micro finance institutions, and they have existed in Nigeria since 1935,
they form themselves into trade union associations, almost all the corporate
organizations in Nigeria has a cooperative society and their existence have
been beneficial to all the members as they provide emergency loans with little
interest rates, members can also collect this loan to start a small business
which will provide an alternative source of income. They do have periodic
meeting to discuss the financial status of the association
8.
RETIREMENT PLANS
Some
retirement plans allow you to borrow against vested benefits. Generally up to
50% may be borrowed. The government has made it compulsory for all corporate organization
to be part of this scheme; it is called Insurance Trust Fund which made all the
employee of a company to contribute 2.5% of their basic salary while the
employers contribute 5%.
9. LOAN
FROM BANKS AND CREDIT UNION
These
are funding from commercial, the community banks and specialized bank like
Peoples bank. There is also industrial Development Bank (NACB), which provide
support for SME's.
This
approach will require that you present a formal plan to the bank showing
justification for the amount you are borrowing.
Requesting
a loan when you are not properly prepares sends a signal to your lender, you
must be able to able to convince your lender that you are a good credit risk.
After the harmonization from January 2006, Nigerians Bank will be capitally
solid enough to meet the demand of any serious and well focus industrialist.
10. THE
INFORMAL SAVING SECTOR
The
most predominant type of informal finance in Nigeria is the Esusu. Among the
Yoruba, it is called either Esusu or Ajo. Among the lgbo, it is called lsusu or
Utu while the Edo call it Osusu.
The
Hausa call it Adashi', the Nupe Dashi, the Ibibio Etibe, while the Kalahari
call it Oku Some Esusu operate with written laws while others operate with
unwritten laws but on oath of allegiance and mutual trust. The general practice
is that esusu associations contribute a fixed amount periodically and give all
or part of the accumulated funds to one or more member(s) in rotation until all
members have benefited from the pool.
11.
MAKING USE OF INDEPENDENCE FUND MANAGERS
It
is called the SME's manager limited (SML), which is an investment advisory
company establish by African CapitalAlliance, they have an office at Octagon
Towers Victoria island, Lagos, they are set up to promote SME led investment in
Nigeria by making equity investment in Nigeria, also available is New
Partnership for African development NEPAD, also available is the African
Project development Facility (APDF), they provides credit analysis support and
also assist small business in raising long term credit support usually in
foreign exchange their office is at 11A Ganges Street, Maitama, Abuja.
12.
SELLING YOUR BUSINESS IDEAS
Once
you've got a company set up, it may seem presumptuous to go knocking on the
doors of rich people and asking them to invest tens of Millions of Naira. But
when you look at it from the rich people's point of view, the picture is more
encouraging. Most rich people are looking for good investments, so you can contact
them.
13. VENTURE
CAPITAL
The
introduction of the small and Medium Industries Equity Investment Scheme
(SMIEIS) in 2001 heralded a new vista for the Nigerian venture capital
industry. The scheme, an initiative of the bankers committee and the Central
Bank of Nigeria (CBN) aims at stimulating sustained economic growth in Nigeria
by providing a veritable source of long term funding for small and Medium Scale
Enterprises (SMEs). It is recognized that these SMEs could be start-ups and
emerging growth companies that do not have access to the capital markets and existing
companies embarking on new ventures that entails
Some
investment risk. Consequently upon this initiative, the Nigerian VC companies
especially SMIEIS based VC companies, hence the need for an umbrella body to
represent the interest of stakeholders in this emerging innovation in financial
services in Nigeria The Venture capital Association of Nigeria was founded in
December 2003, and the birth has recorded satisfactory progress so far, within
the short period of its existence. At May 2005 81 Banks have registered with
the scheme and they had set a total of #14.6 billion aside out of which
#4.3biliion or 29% of the fund have been invested. To obtain Venture capital
funding your company must have thorough preparation and a well-defined
management structure in place.
14.
MULTINATIONALS
Some
multinationals has tried in their own way to help the small scale enterprises,
they empowered the community through the support and promotion of micro and
small enterprises, helping people to create additional goods and services for
local markets.
Today,
hundreds of community based enterprises, micro-credit schemes, Youth Business
Development Programmes and Neighborhood improvement schemes have benefited from
these programmes. Such programmes are traditionally implemented by NGO's on
behalf of the Oil Companies, NGO like growing business foundation; their office
is at 15th floor UBA House marina, Lagos.
15.
PERSONAL SAVINGS
Set
a budget at the beginning of every month, sit down and look at how much money
you'll have coming in. Subtract the amount you'll owe for bills that are due,
and make a plan for what's left over; you are your own best "lender"
if you have the savings. This approach can be quick and easy a lot of business
has grown has a result of good saving plan.
16.
GRANTS
A
lot of grant seekers have developed their business as a result of their
requesting for grant from foreign grant makers, for instance African
development foundation ADF, supports is focused on community groups, and
businesses where there is active involvement and participation and other
underserved populations. Their application form is FREE, and their office is at
Plot 54 Ibrahim Abdulkadir Close, Off Mississippi St. Maitama, Abuja, another
NGO that is based in Nigeria is fate foundation their aim is to foster wealth
creation by promoting business and entrepreneurial development among Nigerians their
office is at Ijora in Lagos
17. CORPORATE
SUPPORT
Strategic
partnering aren't just a much-talked-about trend, they're the best alternative
for many companies that find themselves either shut out of traditional finances
deals or unwilling to swallow the equity valuations or interest charges required
to make those deals happen.
18.
SELL ASSETS TO RELATIVES AND FRIENDS
Asset
sales to relatives and friends can offer a neat and relatively simple
alternative to either loans or equity deals. Put simply, your company sells one
or more assets to someone you know or trust, he or she then leases those assets
back to the business at a price that seems fait to both of you. Your company gets
one tine infusion of capital and presumably, better leasing terms than it would
have received if it had been dealing with an independent financier. Best of all
your capital structure remains clean.
19.
TRADE CREDIT
A
very important source of financing for your business may be from the creditors
and suppliers with whom you do business.
Many
suppliers will originally ask for cash on delivery or, in some instances, they
want payment before starting on your order, depending on the nature of your
purchase. Most suppliers will quickly establish trade credit with you once you
have gained their confidence by continuing to do business with them and paying
as requested. Establishing good relationship with trade creditors is essential
because it allows you to use the goods and services in your operation and sell
your product to your customers, in some instances before you pay for them.
Other suppliers will rely upon the trade credit you build today as you attempt
to establish yourself with other suppliers in the future
20.
REWARDING A LOYAL MANAGEMENT TEAM
You
can reward a loyal management team to invest in your business since they share
your vision, you can give them 10 to 30% equity in your business Business
funding initiative from foreign Countries: United states agency, call Small
Business Administration SBA is collaborating with Nigeria Investment Promotion
Council (NIPC) to assist Nigeria SME's to midwife direct foreign investment in
Nigeria. This has resulted in partnerships joint ventures and other collaboration
for the export of SME product to the US. For more information you can contact
NIPC in their office at Plot 1181 Aguiyi Ironsi Street Maitama District, Abuja.
United States –
Nigeria
Development Institute (USNGDI), the institutes ensures that market access,
technology transfer, capital availability, and management training are realized
in ways that increase the sale of Nigerian products in the United States their
office is at 2A Bobo Street, Off Gana Street, Maitama District, and Abuja. The center
will be the place where Nigerian entrepreneurs will receive intense one on one
support in developing an export for their products and services
21. CREATING WEALTH THROUGH LEASING
Equipment
leasing is without doubt, the creative financing alternative of today. Though
young in Nigeria, globally it is an imposing industry in terms of scope, size,
potential, as more and more of the world's equipments need are met through this
unique form of financing. Leasing meets the different needs of lessees. For
example small companies may lease to conserve cash and large profitable companies
may lease to keep bank credit lines open to other purpose. In order words, an
equipment lease is usage agreement between an equipment owner and a user of the
property. The user pays the owner a period a of rental fee as compensation for
the usage of the property. Your number 1 life changing magazine has decided to
bring to you the varying opportunities leasing can offer to today's inventors.
Equipment
leasing is a tool that can be used to solve the problem of inadequate
investment in capital equipment, high cost of equipment maintenance and the
general problem of lack of needed loans and credit facilities. Considering the
poor financing position of most manufacturing companies, replacing obsolete
machines, maintaining existing ones and repaying existing loans could often
become difficult, worsening further the lots of these companies, but lease
provides a measure of relief through the provision of non-cash financing
window. The leasing company in Nigeria has been estimated to worth over #115billion.
This figure according to Equipment Leasing Association of Nigeria (ELAN)
excludes the assets base of other stakeholders in the industry who are members
of the association.
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