Addition Sources of Funding

Friends and relatives

This is the second most preferred way of raising money by small business owners as it is deemed to be less risky and can bring on board a huge luck. Friend and relatives can be distributed around the globe and thus takes the time to realize this fund. It is one of the oldest methods of raising money and has been used since the ancient times. However, it is limited to the capability and resources that are local and common to the family. It may result in preventing various households from getting an opportunity to implement creative business ideas. The method enjoys the benefits of having the people who carried the burden close to the business and may offer a significant amount of help when it is needed. It is wise to enter into this way of funding in a formal way like borrowing from banks to prevent future problems because this money is assumed to be payable.

money from friends and relatives


Loans from are funds that can be accessed by small business owners easily and conveniently. These funds are borrowed, to be returned with interest. It is the most common in the business environment and brings with it a huge risk. It is thus not appropriate for startups, but it has proved to be a necessary tool for businesses that are intending to move to the next level. This method calls for individual business or the owner’s ability to repay the loan. The finances that will be awarded will be determined by various considerations. This may deny the business the chance to acquire much-needed cash injection thus making it difficult to realize the dream at the time.

In most countries, individuals who may have failed to meet paying expectations may be prevented from accessing this facility making it more difficult to rely on this method of financing, particularly in the developing countries. It would require the national government to step in and allow those who have paid their debts to continue enjoying this facility.

Equity finance

Equity finance

It is a method common in the developed world and very suitable for owners who have great ideas but are limited in cash flow. It is very suitable for small businesses because apart from injecting money into the business, it also brings fresh mind commonly transforming to new ideas. As the lender becomes a shareholder of the new business, it has little or no risk of repaying the funds. It is a method worth advocating for but because of the selfishness of most investors particularly in developing word, this strategy has been under utilized leading to loss of opportunities. Equity financing has seen small and medium enterprises rise to become giants after accepting equity financing from financial giants. It is also very popular between competing companies who may be willing to streamline and align their resources and services to be able to compete globally.