Top Sources of Business Finance in Kenya

Anne Katana

In this guide, we will look at the top sources of business finance in Kenya.

A small business is a scary thing to put together. It’s a lot of work, and you have to be so sure about your niche, or it might not get off the ground. You want to make sure that you have enough funding behind you so that you’re not scrambling every day, but at the same time, don’t take too large of a loan out because if the company falls flat on its face, you could be in trouble.

There are several ways to fund your business, but you need to be careful who you take money from and how much. This article shows you some of the top options and how to get them.

Best Sources of Business Financing

Here are the most popular sources of business financing in Kenya in 2021.

1. Bootstrapping

Number one on our list of top funding sources is none other than bootstrapping. This method usually involves being very frugal and careful with the spending. Business owners who are passionate about what they do will often use this option to keep their business afloat-and that’s exactly how it should be. To succeed, you have to put your heart into it, and there’s no better way to do that than putting all your money into it as well.

Many entrepreneurs will choose this route because they have no collateral for a loan or don’t want to get loans from a bank. Bootstrapping is done by many small business owners who know their business very well-it is the best way to make sure that things go smoothly.

2. Venture Capital

The next thing on our list of sources of business finance in Kenya is venture capital or private equity. This can be a great resource for you, but you have to be careful because, though it might sound enticing, venture capitalists are in it for one specific reason: they want to make money. So if your company doesn’t show promise of making money from the get-go, they will quite refuse to fund you.

Why should they? They have a lot of money to invest in something that has proven it can make them more-they don’t want to waste their time on something that might or might not work. You need to prove yourself from the beginning and show signs of growth immediately, or you won’t get anywhere.

Venture capitalists are interested in many things, for example, if you have a great service. Still, you’re having trouble getting the word out about it; one option is to partner with an advertising company. This way, they’ll help advertise your product to share the profits. Sometimes partnerships like these work out for the best.

3. Grants

Grants are another good option to consider if you want to get your business done faster. A grant is given by a government or some organization with the sole purpose of helping you set up and get your business going; they’re not always easy to acquire, however, and generally, the process is a long one.

One good thing about grants is that they don’t have to be paid back, though you will have to make certain concessions to get them. It can be tough to figure out how to get all the paperwork together, write up your application, and so on, but it’s worth it if you manage to land this type of funding.

4. Crowdfunding

If you’re having trouble coming up with enough financing for your business through more traditional avenues, consider taking advantage of some forms of crowdfunding. Crowdsourcing has become hugely popular over the past few years because people are becoming increasingly frugal when it comes to spending money on new products or services; they want to see that what they’re putting their money towards really is going to be worth it.

Consider crowdfunding if you have a great idea but don’t have any capital. You can set up a page on a website where people can donate whatever they want; the perks could include free products, discounted prices, or anything else in your best interest when trying to get your new business off the ground.

This is an excellent method and one that works very well; it does take time and effort on your part to convince people to support you, but if you show them how what you’re offering will benefit them, people will be more than willing to help out.

There is something to keep in mind when it comes to crowdfunding: if you ask people for too much money, they’ll realize that you’re not honest with them. It’s better to aim a little low and set up your initial fundraising goal at $5,000; this will show potential backers that you have some idea of what you’re doing, and the fact that you even gave a specific amount shows that you’ve done your research.

5. Angel Investment

Angel investment can be a good option for you if you have an existing business that’s already proven itself and the amount of financing required is not more than $500,000. This type of investment comes from a wealthy individual-someone who has money to spare and is interested in investing in your company.

These types of investments are very tough to find because there are so many different people out there trying to get their hands on some cash; you must know how to approach this sort of investor, though, because this might be the opportunity you’ve been looking for.

You want them to see exactly what they’re getting into when they decide to go ahead with a potential investment in your company. Make sure that your business plan is professional and that you’ve done some research on this specific investor so that they see how serious you are about making your business a success.

6. Debentures and Bonds

A debenture is a document you sign that states you will repay money to the person or people who lend it to your company. A bond is similar, except that interest rates and payoff dates are outlined in great detail, so this type of loan has more strings attached than something like a debenture would.

Debentures and bonds make up the majority of non-equity financing available for businesses; these are both generally very safe for investors because there’s no promise of any return when they invest in one of these. They’re willing to help out companies like yours, but they want absolute security that they’ll get every penny back -plus interest at some point in the future. You can obtain these types of loans from banks or other financial institutions.

The downside to these loans is that they can be very time consuming and difficult for you to acquire; if your business has been in operation for some time, though, you can get a hold of one of these but make sure that it doesn’t put your company past its breaking point.

7. Share capital

Share capital is significant for your company because it gives your business owners an incentive to keep things going and work hard. Aside from not getting paid until they return on their investment, investors are willing to do this because of the risk premium.

This means that your investors will expect a large percentage of profits to make up for any losses; if you want them to be more involved with the day-to-day workings of your company, though, they’ll have to invest more than just money.

8. Lease finance

Lease finance is quite a unique way to raise funds for your business; instead of going out and getting loans or other financing deals, you can get a good amount of money simply by renting the equipment you need. It’s not uncommon for companies like yours to lease things like machinery when they’re too expensive to purchase outright; you must figure out exactly what leasing options are available for you to use this alternative source of funding.

9. Commercial bank loans

A commercial bank loan is a line of financing that you sign up for with the intent of repaying it after a certain period; this is often referred to as long-term debt, and it’s one of the more risky types of loans out there because your company becomes responsible for paying back whatever amount was taken out.

The main upside to taking out something like this is that they can lend you a huge amount of money. It will generally take quite a bit longer than other kinds of loans require to get this type of financing from them; if you’re looking for funding in bulk, then this might be the right choice for your business.

You have so many different options for business financing, but make sure you do your research and find the right one for your company. Researching which of these options is best for your needs will be a great step toward success; don’t hesitate to get in touch with us if you have any questions!

It’s important to do your research and find the right financing option for your business, but it cannot be easy. You need to consider what you will get out of a particular deal and how much time and effort is involved in acquiring that type of funding. The article concludes by suggesting contacting them if there are any questions or concerns about the content.

In conclusion, It’s important to do your research and find the right financing option for your business, but it cannot be easy. You need to consider what you will get out of a particular deal and how much time and effort is involved in acquiring that type of funding.

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Anne is a student of history. She enjoys sharing her passion and experiences with people through blogging. She started to educate and inspire people globally.
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