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Personal Finance

How to fund your business without a debt sentence (Part 3)

There are about seven funding options open to you if you want to fund your business with speed.

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…continued from last week and you can click to read part 1 and part 2

The Funding Options

There are about seven funding options open to you if you want to fund your business with speed. These seven options are as follows.

1. Your Own Cash Reserves – The most Realistic option

One of the ways to fund your business is to build your own solid cash reserves. This requires that you earn a high income and save a big portion of that income. It is the tried and true old fashion way of funding a business. And in fact, the most realistic of them all. Building your own cash reserves do not just help you fund a business. It demonstrates to investors your commitment and resilience. It also gives you the privilege to make mistakes on your own money. And not on some borrowed funds. It is the path that creates the beautiful rag to riches story and a path you should consider in funding a business. The key to success with building solid cash reserves is to choose a method that makes your savings failure-proof and to invest using investment vehicles that shield your money from financial distractions. The most wasteful thing to do is to use savings meant for funding your business for things that have nothing to do with wealth creation. It is the most hateful thing to do to yourself.

2. Family and Friends – The Streamlined option

Family and Friends are a great source of funding and can be really useful if you have such family and friends. While a family can fund your business without the expectation of a payback. A Friend may require you to payback. The problem most times with funding from family and friends is that most people do not them. So the option is streamlined to only a few people. But if you are lucky to have such family and friends by all means use it.

3. High Ticket Side Hustles – The Fastest Option

Side hustles are a great source of funding for your business and how I funded my first business. The best side hustles are the high ticket sales side hustles. There are the fastest to make you money. The most readily available. Does not require many people to get the funding you need. And is a great practice for developing sales skills. An important skill you need to thrive in business and life. The key to succeeding with high ticket side hustles is to choose products or services that are easy to sell. That is products that are relevant to a lot of people and for which these people want to buy. So when you are looking to fund your business with speed choose high ticket sale side hustles that solve problems for many people. If you want to learn more about how to solve high ticket sales problems and earn high income from successful business owners send an email to [email protected]

4. Get Your own customers to fund your business – The Slowest Option

Customers can pay you upfront for your products and services if you position the right solution to them. However, getting to this point takes time. It takes time to create irresistible offers customers want to pay for upfront. It takes time to build a recognizable brand that customers are proud of. And it takes time to understand your customers to the point that you can preempt what they want to buy. This is why this is the slower option. There is a lot of testing, learning, and growing involved. The key to navigating this phase very quickly is to test fast, collect customer data and take massive action. You can also leverage a profitable side hustle while testing to supplement your income.

5. Asset Partnerships – For Capital Intensive Businesses

When you want to start a business that requires huge capital to purchase equipment or machines. One of the faster ways to start is to find someone who already has these assets and partner with them. Business success is about partnerships and collaboration and you must learn to do this when starting a capital-intensive business. This will ensure that you are starting out with little capital risk and you are learning cheaply the process of the business and building valuable relationships. Although they may be income slashes that come with partnerships you must also recognize the advantages you get. You can make up for the slash in income by leveraging a profitable side hustle and practicing disciplined savings.

6. Crowdfunding – For Innovative Products

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Crowdfunding is another source of income and it involves a group of peers coming together to invest in your business. You can get crowd-funded through the different crowdfunding platforms. However, crowdfunding favors more new and innovative products over regular and commoditized products. Crowdfunding also increases the complexity of your shareholding and in some cases can be a turnoff for investors.

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7. Government Grants and Accelerator Program

The government occasionally provides funding to certain businesses and sectors it wants to encourage and promote. Although many people like to think of government funding as free money, it is not free money and it comes with its own terms and conditions. Practically anything that makes you lend money from a person makes you a servant to that person. So you must be deliberate about your funding moves. Accelerator programs like government programs also give grants to small businesses. And they look out for pretty much the same attributes a typical investor will look out for in a business. So you must be prepared to win these kinds of grants

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The truth is there is no free money anywhere except for the money you build through your own sweat equity. According to Mark Cuban Funding is not an accomplishment but an obligation

If you need help to build your own business funds and want to build funds that sets you free and not enslave you to another person. We can help you. Send an email to [email protected]


About author

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Grace Agada is The Senior Financial Happiness Director @ Create Solid Wealth. She is an Author, and Column Contributor in Six National Newspaper. She is a contributor at BellaNaija, Nairametrics and Proshare and she is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you send an email to [email protected]

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Personal Finance

5C’s of creditworthiness: What lenders, Investors look for in a business plan

Business owners need to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.

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Five things to consider before securing a loan

Banks usually are not a new venture’s sole source of capital because a bank’s return is limited by the interest rate it negotiates, but its risk could be the entire amount of the loan if the new business fails. Once a business is operational and has an established financial track record, banks become a regular source of financing.

For this reason, the small business owner needs to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.

Will the business that an entrepreneur actually creates look exactly like the company described in the business plan? Of course, not.

The real value in preparing a business plan is not so much in the finished document itself but in the process it goes through – a process in which the entrepreneur learns how to compete successfully in the marketplace. In addition, a solid plan is essential to raising the capital needed to start a business; lenders and investors demand it.

Lenders and investors refer to these criteria as the five C’s of credit.

READ: 5 ways to raise funding for your business

1. Capital: A small business must have a stable income base before any lender is willing to grant a loan. Otherwise, the lender would not be making, in effect, a capital investment in the business. Most banks refuse to make loans that are capital investment because the potential for return on the investment is limited strictly on the interest on the loan, and the potential loss would probably exceed the reward. In addition, the most common reasons that banks give for rejecting small business loan applications are undercapitalization or too much debt. Banks expect a small company to have an equity base investment by the owner(s) that will help support the venture during times of financial strain, which are common during the start-up and growth phases of a business. Lenders and investors see capital as a risk-sharing strategy with entrepreneurs.

2. Capacity: A synonym for capital is cash flow. Lenders and investors must be convinced of the firm’s ability to meet its regular financial obligation and to repay loans, and that takes cash. More small businesses fail from lack of cash than from lack of profit. It is possible for a company to be showing a profit and still have no cash – that is, to be bankrupt. Lenders expect small businesses to pass the test of liquidity, especially for short term loans. Potential lenders and investors examine closely a small company’s cash flow position to decide whether it has the capacity necessary to survive until it can sustain itself.

READ: How to scale as a small business on a budget

3. Collateral: Collateral includes any asset an entrepreneur pledges to a lender as security for repayment of a loan. If the company defaults on a loan, the lender has the right to sell the collateral and use the proceeds to satisfy the loan. Typically, banks make much unsecured loans (those not backed up by collateral) to business start-ups. Bankers view the entrepreneurs’ willingness to pledge collateral (personal or business assets) as an indication of their dedication to making the venture a success. A sound business plan can improve a banker’s attitude towards venture.

4. Character: Before extending a loan or making an investment in a small business, lenders and investors must be satisfied with an entrepreneur’s character. The evaluation of character frequently is based on intangible factors such as honesty, integrity, competence, polish, determination, intelligence, and ability. Although the qualities judged are abstract, this evaluation plays a critical role in the decision to put money into a business or not.

READ: 7 Ways to pay for your higher education

5. Conditions: The conditions surrounding a funding request also affects an entrepreneur’s chances of receiving financing. Lenders and investors consider factors relating to a business’ operation such as potential growth in the market, competition, location, strength, weakness, opportunities and threats. Another important condition influencing the banks is the shape of the overall economy, including interest rate levels, inflation rate, and demand for money. Although these factors are beyond an entrepreneur’s control, they still are an important component in a banker’s decision.

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The higher a smaller business scores on the five C’s, the greater its chances of receiving a loan.

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Written by Chukwuma Aguwa

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Personal Finance

Don’t be fooled by COVID-related scams

Always consult the institution in charge of health-related matters to confirm any fishy information you come across.

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The nature of and the manifestation of the Covid-19 disease is such that there’s only a little time available to remedy the situation before it gets chronic. Although the infection begins by exhibiting mild symptoms, if you do nothing in a short time, it could lead to death in a matter of days.

This whole picture has caused many to become desperate about Covid-related issues, launching into panic mode at the sight of any information. As a result, such people are not far away from falling for fraudsters.

With the different kinds of news flying around, you mustn’t be fooled by Covid-related scams.

The Coronavirus threatens the health of millions of people around the world daily, also killing thousands along the way. To curb the spread and remedy the situation, bodies like the CDC, WHO, and every country’s local health organisation like the NCDC, frequently circulate information around communities. However, it has also led to fraudsters taking advantage to provide fake news, and even asking for donations.

Each day, there seems to be a new account or NGO asking for donations into the health sector, and though some are legit, many are just fraudsters posing to take advantage of innocent citizens. So far, numerous complaints about scams have been recorded, especially with people who are looking to support the health cause in any way they can.

READ: Africa to spend $9 billion on Covid-19 vaccine, access to supply is big problem

Channels used for COVID-related scams 

There are three major ways scammers take advantage of the haziness of the situation to dupe people. To start with, they appeal to the emotions of humans, who see the high death toll and suffering. As a result of what is happening, people have been willing to donate funds for medical supplies, isolation centres, and financial compensation for medical workers.

Scammers take advantage of this by posing as charity organisations and solicit for funds. Most times, as soon as their target is met, they clear their footprint without leaving a trace behind.

Another way they scam people is by manufacturing and selling fake or low-quality health products. Everyone wants to get their hands on a cure, or something that can at least protect them from the virus, and scammers are meeting their needs by providing just that.

READ: China joins WHO vaccine programme as it fills huge gap left by United States

The World Health Organization currently approves only one vaccine, and any other thing outside it is outrightly fake or just a supplement that will help your body. Currently, only the Pfizer vaccine is clinically tested and approved to work. Be sure to not throw your money in the wind by purchasing some of these fake drugs around.

Lastly, scammers create systems to extract a patient’s personal information, thereby having access to the person’s true identity. It could be in the simple form of opening a registration portal where you supply all your details.

Therefore, only give information to approved bodies and not any random online site that appears legit. These fraudulent individuals can do a lot of damage to your identity. Stay vigilant, only communicate with approved bodies, and always ask questions if you are not sure or suspect foul play.

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The place of electronics in COVID-related scams

These fraudsters usually reach out to you through the digital sphere. Hence, watch out for cold calls, text messages, or emails requesting donations to certain bodies. The best way to confirm the legitimacy of such a message is to visit the organisation’s official website in a different browser. Never follow the link in the mail or text directly, as it can be easily embedded with spyware. Therefore, a single click could see them extract all your personal information, including bank details.

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Also, please stay away from those who claim to have a cure, and accompany it with testimonies of people who have used it. They are low graders desperate for your money. Vet them by searching online and see what people are saying. In all, always look out for suspicious messages, and opt out if you are sceptical.

In a nutshell, you should not believe any cure, vaccine or supplement that the World Health Organization does not approve of.

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Conclusion

The government or legit health institutions do not cold call citizens to request donations or coerce them into making one. If you receive a call out of the blues, chances are it’s a scam, which is why they mostly try to hurry you to donate before you realise it. Always consult the institution in charge of health-related matters to confirm any fishy information you come across.

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