Some people are multi-talented and as such cannot stick to one job-hustle-duty. Still yet, others are forced to hold multiple jobs of create additional sources of income to supplement their income and meet their living expenses. Whatever your reason may be, the side hustle has become a fixture and norm in our lives today. We live in a world today where not monetizing your passion is very detrimental. Cue in the side hustle. What makes a side hustle peculiar is the fact that it’s run alongside your day job or main hustle. Its main aim is either to supplement income or to fuel a passion. Regardless of its reason; the side hustle like every business venture needs money is to thrive.
Sourcing for capital is a pain, particularly in Nigeria where you have to go through hoops with the banks and the interest rate is KILLING! There are some other sources of funds though, and regardless of what stage your business is at: Seed stage (start-up phase) or growth stage (scale an existing business); cash is important.
In order to ensure you don’t inadvertently kill your business with a cash injection from an unwise or expensive source, here are a few pointers on sources of funds to fuel your side hustle or business.
A large proportion of businesses in Nigeria are funded from personal savings. However, DO NOT INVEST ALL YOUR SAVINGS in your side hustle. Being that our society doesn’t have the safety net available in developed countries by way of health insurance, etc. It is advisable that you ALWAYS have back-up funds for emergencies, so you cannot afford to invest all of your savings in a business. Particularly because there’s a risk as with all business ventures, it can go south. Savings is however an interest free, stress free means of cash inflow.
My advice though is to treat whatever funds you inject into your business as an investment. Have a payback/ dividend plan, treat it as business funds and ALWAYS ensure you keep your personal funds separate from the business funds.
- Family and friends
Another source of funds is your family and friends. This source of funds will most likely be low-interest or interest free. However, as with all sources of income, we need to be careful as to the terms of repayment. Do not promise and unachievable payback period as that would have ruined the relationship. Do not also take your family and friends for granted; be honorable. And if they would rather treat the funds as investment for equity- be smart and business minded. Don’t be sentimental. Don’t sign over shares in your company for less than its market value due to sentimentality. And….. My personal favorite; always include a buy-back clause with every equity transaction.
Your customers are your cheapest source of funds. If you have customers willing to pay upfront for goods and services; that’s a great way to fund your business. Reputation however is everything. Do not accept payment for goods and/or services which you are unable to deliver. With Social media, there is no hiding place for bad service. You can find your business in ruins due to one bad customer review.
They are a number of local and international organisations willing to provide grants to SMEs. Do your research and apply accordingly. Some are grants with no refund needed, while others are meant to be refunded. Whichever you get, do ensure you read the terms and conditions and abide by them strictly. You won’t want your budding business to be associated with an organisation of questionable character, will you?
- Loans or equity
These can be bank or VC loans or investors funding your business in exchange for equity. With these, you have to be really smart and have a professional look over the terms and conditions. Even if you are one yourself, there is the value in having an independent agent look over the terms to ensure they are fair. Your sentimentality might cloud your objectivity, your desperation and passion might also cloud your objectivity. Have a professional look over T’s & C’s. Ensure it’s not a cash injection that may end up crippling the business.
Beyond the 5 options identified above, there may be some other funding options available to you. What’s important is that regardless of your source of funds, if there are conditions; ensure it’s looked over by a lawyer, to ensure its fairness and that it will stand the highest legal scrutiny.
Also, like I said above, if for any reason cash is being exchanged for equity; always include a buy back clause lest your company ends up in another’s hands against your will.
As the year ends, some of us are already thinking and documenting our plans for 2020 and beyond (#teamresolution), others are making plans on how to scale their business. if your 2020 plan includes starting or scaling a side hustle, this article is for you. I will probably share another article on how to merge a main and side hustle seamlessly sometime in the future.
Asides the sources identified above, are there other sources of funds open to SMEs, please share with us.
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