When making plans to raise funds for your business as an entrepreneur, it will be a great idea to consider pulling funds from different sources. Apart from the fact that the funds you are looking for may appear huge to those you are talking to, it will always be easier to ask for smaller funds from different people.
Over the years, entrepreneurs who are seeking to raise funds have flouted the rule of never put your eggs in one basket. This is an important business rule that applies to many areas and should not be seen as just a cliché.
If you want to raise one million for a business, you may consider talking to someone who probably has a lot of money and can afford to give you one million as a loan or as an investment in your business. That is what a lot of people do. They also forget the fact that the people they are talking to may be rich but may not hold unto a lot of cash. There are investments they put their money into and they can get cash whenever they want. So if you are talking to someone like that, you will most likely get an answer like, ‘sorry I don’t have cash.’
Have you ever thought about the fact that it just might be a lot easier to raise one million through four or five people? You may be able to identify four people who don’t see it as a big deal to raise two hundred and fifty thousand. It is also possible to see five people who will be able to raise two hundred thousand and when you put everything together, you would have gotten the fund you need start your business.
In waiting for just one person or sourcing funds from just one angle, an entrepreneur may have to wait for so long and still not get anything. In the waiting period, you may have spoken to different people and you would have gotten what you wanted.
Having to pull smaller chunks of business capital from different sources is a great idea but it also comes with its benefits and challenges which include:
1. It is easier to raise smaller amounts from different sources than to raise a huge amount from one source. When the amount is smaller, people find it easier to invest or help.
2. Investors or creditors are not expected to come asking for their funds at the same time. So if the fund of an investor is being pulled out, it should not affect the business as much as it would when the funding is from one source.
3. Having funds from different sources reduces undue influence of the investor on the business. If the business capital is from one source, the business owner may have to dance to the tune of the investor.
Talking to different people might be time consuming and be a huge distraction. This is so because you have to make the same proposition to different people.
1. Investors may not come for their funds at once but you have more creditors or investors to worry about.
2. While having funds from different sources reduces the influence of one investor, it may also translate to unnecessary bureaucracy for the business. The executive director will have more people to consult or seek approval from in order to make an important business decision.
3. A few pros and cons have been laid out for the purpose of objectivity. That is to let you know how important and effective it can be to try raising funds from different sources without ignoring the cons against your business.
For this reason, you may want to raise capital from different sources but be sure you have weighed the pros and cons before deciding.