Kenyan small business owners are a brave and resilient group of people. Our country is particularly blessed with an enormous entrepreneurial spirit – sometimes driven by necessity, other times by personality, and often, by a bit of both.
Owning and running one’s own business is an increasingly popular choice of earning a livelihood. But, of course, securing small business finance to start your own business is challenging at the best of times – and now, thanks to the COVID-19 pandemic, it’s pretty tough out there.
But that doesn’t mean it’s impossible. Ask most successful entrepreneurs how they did it, and they’ll tell you that hard times often reveal great business opportunities.
Spotting a gap in the market and coming up with a game-changing business idea is one half of the entrepreneurial journey. The next big step is putting your ideas into action – which needs money. This is the intimidating and frustrating part because most young people are not considered ‘safe’ bets by traditional banks.
If you can’t get a loan, don’t have any savings, aren’t related to anyone wealthy (and generous) and don’t have a business network, how do you get the start-up funding you need to get your business off the ground?
Small business funding doesn’t need a bank
As a young entrepreneur in search of finance, you have to think differently and keep on trying. In the words of Ludwick Marishane, who attempted a few business ideas while growing up in Limpopo and now, at the age of 30, is a global success thanks to his DryBath® Gel innovation: “In my view, a person only truly fails when they give up completely on themselves.” So, don’t give up on yourself!
With grit, determination, and some creative, out-of-the-box thinking, you can fund your start-up or side hustle with a range of alternative small business finance options. Here are four suggestions:
Crowdfunding is enabled by digital communities of like-minded people. Essentially, successful crowdfunding gives an entrepreneur small amounts of start-up funding from many interested individuals.
Some crowdfunding sites are donation-based, meaning people donate money simply because they like your business idea and want to help fund it. There’s no expectation of receiving anything in return.
Other sites operate as equity platforms; investors will ask for shares in your business in return for their investments, making them shareholders. When your business begins to turn a profit, you’ll have to pay them dividends.
Of course, the success of any crowdfunding campaign depends on how well you pitch and promote your business idea online. Make sure you create a compelling page describing your business and its objectives. Also, be clear about the amount of money you hope to receive and how you plan to use it.
Microfinance, also known as microcredit, is a type of banking service. It provides low-income and unemployed people with small business finance in the form of small, safe, and ethically managed loans.
Microfinance is a more inclusive form of traditional bank loans. It acknowledges the growing number of Kenya’s necessity-driven entrepreneurs who cannot access standard financial services or support. That said, if you do consider this route for your business, remember that you are still taking out a loan and that you will need to pay it back with interest.
Negotiate an advance from customers
Now this is an interesting approach that can be negotiated in a few different ways.
Of course, having even one customer implies that your start-up is up and running to some degree. So, let’s say that you’ve already enjoyed some repeat business from a few customers, which means they like what you have to offer. If you’ve used the sales to build some personal engagement with these customers and feel like there’s a positive rapport, send them an email asking them for an advance to help you take the business further.
You should offer your customers something in return for any advance, such as a percentage discount on future transactions, free shipping, or shares in the business.
It’s best not to do this on your own, though; ask someone to check your email before you send it – like a trusted ex-teacher, a previous colleague, or even your old boss.
Pitch your business at competitions
This might sound a little scary, but let’s be honest, if you’re an emerging entrepreneur, then you’re already braver than most!
Entering a business start-up competition is a great way to pitch your idea to judges and promote it to a network of potential investors. Not only could you secure some, if not all, of the small business funding you need, but you’ll also get important business feedback from people who’ve been there and done it. What’s more, you’ll gain access to a network of fellow entrepreneurs, possible mentors, and, hopefully, keen investors.
These are just four alternative start-up funding suggestions that could be just what you need to get your business off the ground and flying.
It’s important to remember that success doesn’t happen overnight. It takes time, perseverance, and hard work. A crucial part of the journey is building relationships with people who could play an integral role in your business’s growth – they might not invest in your business or buy from you immediately, but one connection leads to another.
So, put yourself out there and sharpen up your sales skills by entering a competition, joining a crowdfunding platform, applying for microfinance, or strategically engaging with your existing customers. Times are tough right now, but they are also full of hope and entrepreneurial opportunities.