How To Raise Capital For Small Business in Kenya

Today, many people have a profitable business idea but lack a starting capital. This’s the most prevalent problem encountered by small business entrepreneurs across the globe.&nb

Today, many people have a profitable business idea but lack a starting capital. This’s the most prevalent problem encountered by small business entrepreneurs across the globe.  It’s also the leading cause of small businesses collapsing worldwide. But today, there is a wide range of lending companies willing to offer loans to entrepreneurs to boost economic growth.

As a wise entrepreneur, your goal is to find the best place you can borrow capital to start a small business. Before partnering with any lending provider, ensure their funds incorporate well with each stage of your business growth. This post will discuss how to raise startup capital for small businesses.

Use retained profits

Retained profit is a specific amount a business generates as it continues trading profitably.  For instance, if you invest around $1000 in rabbit farming, and then sell them at $2000. In that case, you'd have made an extra $1000, which you can comfortably invest into your business empire to continue scaling higher.

You can also use retained profits in your dream business project by plowing back your profits. By doing so, you’ll retain your growth capital towards the cash. However, you need to be more disciplined with each move you take.

Asset-Based Financing  

Asset-based financing is the best way to raise capital for a small business, especially for a business that has accumulated wealth and already operating. Such a business can use some of its accumulated assets to pay off its finances. For instance, you can strike a deal with an investor to finance your small business with around 80 percent of your total current stock value. 

The good news is that the entire process is quicker and easier than traditional loans. It’s also a pocket-friendly option and flexible, thus suiting almost all different types of business empires. Some of the asset-based financial local lenders for small businesses include:

·         NSE Bank

·         Equity Bank

·         Commercial Bank of Africa

·         KCB Asset Finance

Look for venture capitalist

The venture capitalist is one of the many lending companies that offer loans to the qualified candidate with the best profitable business plan. The lender requires a person to have a good credit score to be given money, unlike banks and other lenders out there. However, you’ll need to give them a part of your business empire. For instance, the lender may decide to finance your business with nearly $1000 if you’re ready to give out approximately 25 percent of your business worth over time.

The advantage of this option is that venture capitalists will guide you in every stage of business success rate to rise to the pinnacle.  But the problem is that you will have to give out a significant part of your business to get the loan.

Generally, the venture capitalist is the best place to get capital to start a small business in Kenya, especially for entrepreneurs who want to start a business but lack starting capital. Some top venture capitalists in Africa that collaborate with the SMEs include:

·         Griffin

·         The De Silva Group

 Join Chama 

Chama is a common Swahili term used in Kenya. Chama is formed by specific financial members with a common interest. You can join trustworthy Chama and then start saving cash.  Below are the benefits of Chamas in Kenya:

·         Chamas is available for different kinds of loans such as the Uwezo Fund and Youth Fund

·         Chamas is the best place to get startup capital to start a small business because members engage and share insights on how to propel their savings account and start a business.

·     Chamas also encourages members to save considerably. For instance, you start by saving 50 shillings every week for 6 years. How much would you have saved?

Angel Investors      

Who is an angel investor? This is a prosperous and reliable individual who offers financial support to startups at an affordable interest rate and fee. This capital can be categorized into two forms: the support fund that leverages your business through a tougher economic crisis or a one-time injective.

To get an angel investor loan, you must have an exemplary business plan. The goal of a small simple business plan is to convince angel investors how you will implement every stage of your business. 

If you’ve been struggling to generate capital for a business, consider angel investors as your first option. In addition, angel investors are more friendly compared to the banks and other lending providers out there. Their main goal is to see your business rocking across the competitive world economy. 

Angel investors work like venture capitalists, but the difference is that angel investors are more friendly, unlike venture capitalists who need a particular portion of your company's assets.  Examples of angel investors include:

·         Savannah Fund

·         Business Partners

Join Peer-to-peer lending networks    

Peer-to-peer lending networks are the most popular lending option for small businesses. It’s also knowns as a crowd-lending system. Its main work is to bring borrowers and savers together which eliminates the need for banking options.

In this tough economic crisis, many people are willing to lend out their money to earn an interest rate.  Although there isn’t any bank between small business gurus, it’s possible to get a loan to start a small business.

According to Kenyan customer reviews, a peer-to-peer lending option is the best way to raise capital for small businesses.  An example of a peer-to-peer lending network is:

·         Zidisha Peer To Peer Lending Network