If you were to ask in a general business meeting, Church, mosque or in any gathering that how many people have ideas, you will be amazed with what you get to see as a response.
One of the things you quickly discover is that you are not the only one with great and sound ideas; neither are you the only one who needs funding. Most people will, rather than developing the idea into a plan and strategy, they jump out looking for funds to finance the business. They then begin to complain that people or banks are not interested in thelping businesses . I once watched a TV programme where people came with ideas for funding and you wonder how they got to the TV. It was obvious that God was doing them a favour by not giving them money for the business in the first place. Today will be dealing with what investors look for, what Banks, funding agencies, partners look out for in your business before committing their funds into your idea or business.
How much is required from them? Most times, most of us look out for huge amounts of money TO START the business whereas we do not need that huge amount of money; we only want to start the business from the top. Imagine a man who wants to start business of producing soyamilk in bottles, and needs 3 million naira, but the only experience he’s had has been to prepare the soyamilk for 10 people! Investors will also want to know how much you are willing to put into the business, especially if you do not have a cogent excuse to be indigent. Nobody will invest in an idea you are not willing to invest heavily in yourself.
For funding organizations, it is important to know themarket, the competition and the conditions under which your business is being launched. An already saturated market will require a risk-taking investor, if you need someone to fund your organizations. It is generally known that banks are reluctant to fund agriculturally related projects mainly because of the high risk involved in the farming process.
Some other factors include; industry- size; target audience, competitors and players, season- cyclical. The partner or bank will also like to know you are willing to bear the risk associated with going on with the business and the ne essary risk mitigation startegies you have in place.
Capacity to repay:
This is the primary intrest for most institutions that may require interest on your pating back terms. How long it will take for to recoup money invested is also a consideration. Is the commodity one that the money will just be a once time investment and recoup such as supply and delivery of goods amd services, or one such that it will require gradual
This is most comonly called virtual capital. Your character is the capital that you have that guarantees that you can get cash even on the viability of your word. It is possible to conduct business, collect goods based on this tremendous goodwill you enjoyed or are enjoying. An investor who saw that at one time you borrowed money and have repaid within the specified time, assures the investor that he is safe.
I get money in credit and return within the experience in handling the area/field of work is also part of your character when it comes to looking for finances.
Collateral is one factor that chases people out of banks. a collateral is an asset that you have put down as a guarantee to pay the money. Of course, if the time lapses and the money is not yet paid, after a while, the Investor may beging to look for a way to recoup his money by impounding and selling your assets. I know one way of going around this is to have a guarantor (you character- virtual capital)who can vouch for your integrity.
It also may be reassuring that most Micro Finanace Banks can grant up to N500,000 without collateral and after fufilling some minimal requirements.
But then, remember money is not the most important thing you need to start your business. it may be needed to grow it but it is not mandatory you have lots of money. All the best.