The big question this week is, where can I get Kshs. 20,000 to get my business started? The money might sound and look too big and impossible to raise for many of us. But it isn’t all that big. We explore a few options here.
Ever heard of Boot Strapping? The Englishmen say you lift yourself by the straps of your boots. This means it’s all by yourself to raise the money organically without getting from external sources. Easily, there are 2 kinds of sources from within you
What’s the plan? By when do you need to raise the money? It takes a lot of commitment to raise even 20K. This easily translates to roughly Kshs. 55 every day, Kshs. 380 weekly or 1,700 monthly. Now I know it sounds shallow but I promise you for most youth, we live on a much higher amount daily. In fact, most youth are able to burn such kinds of money on any day. How much goes to smoking, muguka, airtime etc? I am sure most youth will once in a while chance upon good money. A random 5k or 20k or so. You get the odd job ‘kibarua’ that will earn you around that much. Otherwise, there is no way you have that phone uh!
Nowadays almost all of us have bank accounts. It’s even possible to open an account on phone (M-Shwari) which makes it easy to rally savings. Better still you can save in a SACCO or table banking group where the money earns good interest and dividends over time.
- Disposal of Idle Assets (and liabilities)
Again, it is common to find a hustler who can’t raise 20k but he has a phone or household electronics worth around that much or more. You have livestock at home worth around that much. I mean, we are able to raise 20k for all reasons other than capital for our business ideas. When the plan is ripe, and you are ready to start your 20k business, then some of the things we own that don’t keep us engaged or bring income can make way and release the money for business.
Externally, there are generally two sources you can get this kind of money; informal sources and formal sources. To A few sources on the informal side? Ever heard of the 3 Fs?
I am sure you know of someone who was helped by a member of their family to get started. You family either gives you the business, the money, security (title deed or log books) to obtain loans, their connections and networks to access the money or markets or the simple moral support or peace of mind as you get started. Imagine how much it has cost your parents until you are where you are. All the basic needs, schooling and many other expense. It is a lot. So if you manage to convince them that the only thing standing between you and your dream is only a 20k do you think it would be impossible to get it? No. All you need is a good plan and the attitude to back it up.
What kind of friends do you keep? They must be the ones who wish you well. It’s common to hear from business people that they got help from friends to get started. Again, it ranges from getting the money or security to access the money, to partnering, to accessing their networks and connections. Sometimes it might even be as simple as getting into a group with you to help in accessing government or development funds that require the group model to access.
It is rather harsh to call people fools especially those who help out of their good heart. But my teacher told me there are enough of them around. Those who will give you sometimes at their expense or that of their family. You might have heard of someone who could give another a whole 20k for whatever reason. But its money not to be repaid back. At least not in cash. Maybe with a good plan you might convince them to back your ideas.
Then there are the formal sources which include banks and other authorized money lenders. They do however, have requirements. Some easy for someone starting and others a little difficult. Most of them need you to hold an account with them (They use it to know and evaluate you) others aren’t deposit taking so you need no account.
- Crowd Funding.
This falls in between free and loan money. We have had ‘Harambees’ for a long time in Kenya. The innovation around it is online platforms that make it possible for one to fund raise for their ideas. You have heard of M-changa? There are many other tools online. By the way, we all need to move from the culture of crowd funding in terms of problems and disasters to embrace funding business ideas. We can. We should.
- Commercial Lenders
These are the authorized lenders like Banks and Micro Finance Institutions and some of those dealing in online and lending. Banks are the biggest lenders to businesses. They need you to hold an account with them, they need to be active for some time and may need security. If you are getting into the world of business then you may not be able to avoid them. Depending on your usage, some will give you small advances even through the mobile phone (Equitel, M-Shwari, M-Coop and many other banks). It’s also possible that for most of the youth wondering how to get started in business they have boosted their M-Shwari limit to the region around 20k.
SACCOs will need you to hold an active account with regular deposits. With most, you only need to have saved 7k to be able to access 20k. Then you will need two or three guarantors. Can you raise them? (Funny some people are so unreliable they can’t get anyone to guarantee them)
- Development Lenders
There are so many NGOs with small entrepreneurship support kitties where you can easily get money in terms of free grants or concessional loans. These are the NGOs engaged in stimulating and supporting livelihoods projects in specific sectors like agriculture e.g. AGRA, RTI, Enablis etc. I am sure you know someone who wrote a proposal to one of this NGOs and got some funding. Did they start or boost their business with that money
- Government Lenders
The government is also actively involved in promoting entrepreneurship. Some initiatives will give free grants and other concessional loans. In most instances they advance their money to groups but it is also possible to get as individuals.
With the Youth Enterprise Development Fund you will be able to access 100k as a first loan with only a group of 5 members. That is easily the 20k you have been looking for. The Youth Fund also advances to individuals in business but amounts larger the 100k
The Women Enterprise Fund also lends to women groups
Uwezo Fund is available to all groups
The National Government Affirmative Action Fund advances grants to groups to buy machines etc.
The Department of Trade in your county (through the Joint Loans Board) will advance money to individuals starting 100k
The thing with groups is that most people usually form them to access the public funding without a clear plan or intention to start a business. They end up putting their money to uses other than business. Groups have been with us for long (merry-go-rounds etc) which help people rally savings. Now the table banking model is making it easier for people to access the small capital they need for their businesses.
I am sure there are many other easy sources for getting the 20k needed to start a business. Please let’s share them in the comments section below.
Do they say ‘dalili ya mvua ni mawingu’ You can almost always tell a business that will succeed or fail even from an early stage.
>>>Next week we talk about the major characteristics of a successful and entrepreneurs/enterprise<<<.