Top Sources of Business Finance

Business financing has always been a topic of concern for many business owners. In today’s article, we will discuss the top sources of business financing in Kenya in details.

We will divide these sources on three major categories based on whether they are long term, medium term or even short term sources.

Sources of Business finance

  1. Long term sources of business finance

These sources of business finance can take a long time to repay back. Below, we will list some of the best business finance.

    • Venture Capital

Venture capital has recently become very popular especially among technology companies all over the world. This top source of business finance involves investors coming together and pooling their resources for a business they believe has potential to grow.

    • Angel Equity

When using this form of financing, a business owner seeks a business executive who is a leader in the field of his operation. If the executive is willing and able they will invest in your business as well as offer you advice about navigating the market to succeed. This is what Angel equity is all about.

    • Debentures

If you are avert to risk and would like to finance another persons business, try out debenture. They are a long term source of business financing. In order for this to happen the business owner will lend money from you and then write a document to act as evidence that he/she has received your money.

Most of the debentures might be secured meaning that even if the business owner loses their business you can still get it back.

    • Share capital

Share capital is one of the oldest form of business finance in Kenya. It basically involves getting financing by selling part of your business to interested parties. The shareholder therefore benefits from earning benefits while you get to spend their money in financing your business.

    • Bootstrapping

This type of financing is very common among innovative startups who would like to operate without restrictions from investor. It involves a business financing itself from its own earnings or profits. As a result a company survives through living within its means.

Therefore, if you would not like to give control of your business, try this type of financing.

2. Medium term sources of business finance

    • Lease finance

Supposing you are in the logistics business and have been looking to increase your fleet of truck. However, your do not have enough amount in your bank to fulfill this desire. Instead of buying the trucks, you can lease them for part of their life or for most of it. Lease finance is therefore a very good source of business financing.

    • Commercial bank loans

Almost all banks operating in Kenya offer commercial loans to its customers. As a business owner, you may decide to go through this way of financing. It is however very important to do your research and select a bank offering affordable interest rate and with favorable payment conditions.

Best banks for loans in Kenya

    • Hire purchase

Hire purchase is also a medium term source of business finance in Kenya. This approach may be useful especially when a business owner is looking to finance Assets like motor vehicle and machinery. Most of the times however, getting an item using hire purchase approach may end up costing you more than saving you some cash.

3. Short term sources of business finance

    • Customer advances

You may ask your customers to make advance payments for items, goods or services they need. As a result of this, they might be helping you to finance those items you need to supply them with. However, this type of business finance is usually short term.

    • Loans from friends & Family

This is the oldest form of business financing ever available to business owners. You can ask your friends and family for their money to help you finance your business. However, always remember to repay back your loans.

    • Bill discounting

Bill discounting is all about the seller recovering part of their sales money from an international financier before they have they have supplied the goods. Bill discounting has become quite popular with the advent of technology and internet.

Conclusion on sources of business finance

Above are the top best sources of business finance in Kenya. Research more about each source before you decide to finance your business using it.

Read More: Asset Financing in Kenya – The definitive guide

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