Finding ways to fund a small business in developing countries is not only difficult, it is one of the many reasons why a lot of small business owners have abandoned their businesses.
As a small business entrepreneur trying to raise funds for your business, you get to realize that there are a lot of hurdles you must cross, before you can eventually get to raise the needed funding.
Although most businesses in need of funds will automatically think about loans and other securities. As a small business there are chances you won’t have easy access to loans as compared to bigger businesses.
To get out of this hurdle, you will have to find alternative ways to fund your business without loans. And in this article, ill be showing you how you can raise business funding in the following paragraphs.
Bootstrap your Idea
Regardless of your location, bootstrapping is one of the most well known alternative ways to fund a small business without loans.
In a small business context, bootstrapping is connotes starting a business with your own existing resources like funding, office space, equipment etc. instead of sourcing money from investors.
Bootstrapping has not only been very useful for business owners at the early stages of their business, it has been one of the most useful strategies used by business who later metamorphosed into trillion dollar companies.
The reason is simple. As a starter; unless you have a million dollar idea which is rare, most investors will rarely invest in a business idea that is yet to gain some form of traction.
So, instead of waiting in vain to recruit believers in your idea, you can decide to bootstrap your business by using your own resources.
Starting with equipment, you can start your business from home, your garage, bedroom or elsewhere, until you’re able to get the funds to pay for an office location.
Again, instead of paying out rightly for new equipment, you can start with using your already existing equipment, where they fit in. This saves you the extra cost of paying for equipment out of your pocket.
Bootstrapping also involves using your personal savings to fund your small business. Doing this gets you a head start and some funds to get a decent traction before you can finally raise the needed funding.
Work Part Time
Another easy way to fund a small business without loan is to run your business on a part time.
Running your business on part time will be very beneficial for you, if you’re currently working or engaged in other form of employment.
For example, besides your savings, while working part time, you will have access to funds you can use to invest in your business and even take care of some other needs without relying on your new business.
As the business continues to grow and eventually generates profit, you can then resign or leave your current employment after you’re confident that your business is well able to fund itself and also sustain your own financial needs.
This particular model of fund raising is very realistic and it’s helped a lot of small business owners to push their business without taking off the profits too soon or running out of funding completely.
Re-invest your Profits
If you want to fund a small business without loans, re-investing your profits is one of the easiest way to go it.
This strategy will work pretty well both for a service based and product based businesses. So instead of waiting for loans, you start re-investing all your profits into the business.
For this to work however, the business has to exist and be making some form of profit, however small it might be.
The cons with this strategy is that you may actually have to forego any other thing you would have intended to do with your profits at the initial stages so you can re-invest everything back into the business.
This strategy does work for most businesses but it doesn’t work for everyone unless you are very disciplined when it comes to financial management.
PS: If you’re a struggling or “hungry” entrepreneur without any other viable source of income, this strategy may not work for you.
Team up with Others
As one of the ways to fund a small business without loan, you can team up or collaborate with other businesses in your niche, depending on your areas of strength.
This is very effective for service based businesses.
For example, if you’re a Graphic Designer without a website and you know a website designer that would need your services…
You two can get into an arrangement where you design a set number of graphics for them and have them set up a website for you in return.
Same thing goes with a video editor or photographer that knows a social media influencer.
You can offer to take up their videos or pictures, create, edit or work on them and get exposure in return through their platform.
It’s a simple win-win arrangement. More like a trade by barter situation where you use what you have, to get what you want.
Although this might not exactly get you all the funding you need, it can save you a lot of expenses while you focus your income on your most important business needs
The major challenge with this idea is that majority of businesses using this approach are usually service based businesses. If you’re into a product business, you can also check out if this strategy can work for you.
Start with a Low Cost Idea
Let’s say you want to deal in mobile phones for example and your budget cannot really fund that business idea, instead of going to get loans with high interest rates, you can work on starting with a low cost alternative and then save up and grow into your original business idea.
So, instead of mobile phones, you can start with phone accessories and gadgets (if that’s affordable for your budget) then expand to include mobile phones, as your business continues to generate profits.
Alternatively, let’s say you have certain set sell-able skills, (For example, you’re a writer, designer etc) and you want to start a service based business
As someone with a flair for writing and some good social media skills, instead of waiting for money to launch a copy writing website, you can start with social media management as your part time business.
With this, you may not necessarily need a website for your first job. All you need do is put your social media profile in shape.
After that, reach out to people who are not too familiar with social media or people who are too busy to manage their handles, market your services to them and get positioned to start working.
Once they are ready to work with you, you can use your writing skills to help them and get paid for your services.
With this, you can save to fund a small business of any kind while also evolving a brand for your business, in the mean time.
At the point you’ve made enough savings from this, you can then go start up your main hustle.
Join Contributions
The term ”Osusu or asusu” is a form of rotating savings or informal credit facility where the members contribute a fixed amount of money to a bulk sum, from which they can take turns to get funding, at intervals.
You can gather or join a set of like-minded people where you guys contribute a fixed amount of money individually.
With such arrangement, at a set time, one contributor takes from the whole contribution to cater for their needs, only to pay back little by little as the cycle of contribution continues.
With contributions like this, you get a free loan to fund a small business of any kind, without having to provide collateral or interest while paying back in bits as the cycle of contributions continue.
What is important here is gathering like-minded people. And being able to enforce consistent contributions.
Get a Business Partner
Getting a business partner or partners is one top alternative ways you can fund a small business without loans.
While I do not believe that everyone is interested in your business or idea, there might be one or two persons out there, with funds that can be invested in your business if only you can “sell” the idea to them.
This could be your friends, family members, colleagues or even interested investors.
So, instead of worrying over who’s interested or who’s not interested in your idea, you can as well start pitching your ideas to these potential investors.
Depending on the size of your business, to get started, you can start with mapping out a partnership or investment proposal. Then pitch your ideas in a way that will be appealing to them.
Tell them about your business, the prospect and the benefit they stand to gain by investing or partnering with you, in no uncertain terms.
To make things even bigger, you can approach venture capitalists and other angel investors with cash, willing to invest in your business. Although chances of getting through with the latter two can be slim, there’s nothing wrong in trying.
While working on getting investors for your business, always keep in hindsight, the cons that comes with such approach to fund raising.
Same goes for partnerships. You can get into strategic partnership with individuals or businesses, pull your resources together and fund your business while sharing your profits and expenses.
Personally, i prefer partnerships over getting angel investors or venture capitalists, especially for micro businesses.
Use Crowdfunding
Over the years, crowd funding and online competitions have become a lifesaver for many small businesses, offering them a chance to raise funds without losing equity in most cases.
Although crowdfunding is still under-developed in most developing countries, a lot of small businesses have generated funds via crowd funding, in developed countries. And a few developing countries are definitely catching up.
One thing you must have at the back of your mind while exploring funding via crowd sourcing is that for your campaign to be successful, you will need to have a good understanding of the effort you need to put in and ultimately, key factors that’s worked for other successful campaigns.
Now, besides crowd funding another way to fund a small business without loans is to apply and join online funding contests.
For example, there are also a number of government and privately funded opportunities out there. All you’ll need is find out the one that’s worth putting in your effort into.
Be careful not to waste your lean resources and time on opportunities you don’t have much potentials with.
Final Words
Finding alternative ways to fund a small business does not necessarily mean you are going to personally fund the business until it becomes a full blown globally recognized business.
What alternative funding does is that it gets you some funding sources to start and push your business at the beginning stages until it gets a decent traction which you can then leverage to attract bigger funding and investors.
This is how a number of globally renown businesses like Microsoft, Facebook and others started. Personally, this is also how i started my business many years ago.
Truth be told, there are many ways to start your business without loans which you can leverage to start your ideas right now, starting with the ones you’ve just read.
And we can hold you by the hand, show you the bolt and nuts as you get started when you reach out to us here.
Now, its your turn. What’s your biggest challenge when it comes to starting a small business? Drop your comments below.
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