A lot of business entrepreneurs today, always face some thorny problems of raising a good capital to finance their efforts, this is because setting up any worthwhile business venture requires not only technical know-how but also good capital to keep the business going. The major issue then is how to find the right and profitable source of fund with a very high return and equally ensure the lowest accruable cost. Although this may look quite simple, experts are of the view that it is a matter of a careful analysis with regard to the targeted business environment. They equally maintain that failure to secure a good capital is a sure way to business failure.
Whichever way one looks at it, adequate capital is an inevitable condition to start up a business, run it well particularly in these hard days of global economic melt down and ensure a good way to break even, the normal inclement environments notwithstanding. Capital is generally admitted as the amount of financial resources required for the implementation and execution of a profitable business venture.
It normally stands to reason that for an entrepreneur to sell his or her first product or service, the need for financial resources and product development; marketing as well as administrative support cannot be overemphasized. Capital, in the true sense of the word, is not just the amount of cash at hand but rather the fund available for the execution of a business venture, so the primary capital, in this regard, must come from the person setting up the business him or herself. To start with a comprehensive veritable assessment of the entrepreneur’s savings, stocks, bonds, market value of life insurance and investment in real property must be made.
The next step then is to decide the quantity of the assets the person is willing to invest in the business as equity capital since the necessity to inject one’s personal fund into a business cannot be ignored. This is because if an adequate personal capital is not there, the option is to source for the one that will suit the type and size of the intended business venture elsewhere.
To raise a good capital for a new business venture the following questions are to be conscientiously answered: What is the needed capital? How much is the entrepreneur ready, willing and able to invest in the effort? How much can he or she raise from other available sources as well as the ability to convince other persons to provide the balance?
Moreover, ability to plan ahead for the immediate and remote financial needs of the venture, no doubt, should play a cogent role in how much capital that could be raised and sources in this regard can be from two places – debt and equity. When sourcing for capital through debt or loans, the entrepreneur must prepare well-thought-out business plans, market analysis, projected balance sheet, imaginary profit and loss account as well as cash flow projections and this should be for the first six months or at least one year and thereafter three years since this is what lenders normally like to see to guide them in their decisions.
Sourcing for capital through debt from lenders could be quite challenging because the facility providers always evaluate critical areas such as the entrepreneur’s character, capacity to pay, collateral, social conditions and the funds that the person him or herself is ready to invest in the venture as well as the level of the competition in the focal market.