By:Â William Yaw Adufutse, Ph. D.
I have decided to write a follow-up article in response to several email I received from my readers. Some readers are already running their own enterprises, and others are on the verge of doing so. Several email expressed lack of funding for start-up businesses. While others expressed lack of continuous funding while the business is in operation. In my article I stated that hardly will any bank finance a start-up business. Financial institutions examine several yearsâ€™ balance sheet of for profit organizations before deciding to finance them. In this article, I make few suggestions as to financing a start-up business. Future articles will consider the leadership, and the management teamâ€™s role in guiding the business to success, and assure continuous funding and human capital.
Many successful individuals start up their businesses in a very small way. For example the organizations I mentioned in my previous article were started on small scales. Most of the owners started their companies in their basements, garages, or any secure spaces they could find. Because of the lack of funding, and lack of track record, they were not concerned about chasing a dream of bank financing and running into debt. They offered their infant companies what most refer to as â€œsweat equityâ€ that is, working with their own sweat, tears and blood. They were also their own sales personnel since they did not have the fund to hire others to work for them. Over time as they spent time to build the proverbial â€œbetter mouse trap,â€ they went door to door showing their products and spreading the news about their work.
Others used their imagination to amass wealth for themselves even though they did not have money. In my early years while going to school, I decided to be involved in the real estate business on the side. Not having the money and the ability to finance, I decided to work with property owners on what is called â€œLand Contract,â€ a system where one can negotiate properties on contract. The owner becomes the financier while the purchaser pays the owner on monthly basis. When there is a good agreement between the owner and the purchaser, the purchaser can benefit tremendously by renting the property out, and use the monthly proceeds from the tenant to pay the monthly land contract. Many entrepreneurs become successful property owners by that arrangement even though initially they may not have had the money, outright, or not able to get bank financing. The point is that there are ideas that can help the entrepreneur.
An avenue for financing a project is by falling on friends, and family members. One has to have character to be trusted by family and friend to contribute to a start-up project. There has to be written agreements of repayment. But then this is when starting on a small scale comes in to play. Minor expenses can be borne by contributions from friends and family but large ones cannot. Laying a solid foundation, using creative imagination, operating within oneâ€™s means, and having either good products or ideas, will eventually result in a break for the entrepreneur.
Dr. William Yaw Adufutse is from Anfoega in the Volta Region, and a Professor of Leadership and Organizational Change in the US. He can be reached at email@example.com