Getting the start-up capital

thumb-financeThere are different possibilities to get finances for starting up the business: savings and loans. If possible the MBC will help the entrepreneur to get loans for the necessary investment.

The final Business Plan serves as the application for a loan at one of the Micro Finance Partners, Donors, or a Revolving Funds. A different and supplemental way of getting capital is joining a Savings Group from an early stage on in the MBC process.

The Savings Group gathers once a week and every member in the group deposits his/her savings for that week. The rules about the amount that it saved and the way it is turned into a loan of group members, is determined by the group itself.

Other ways of financing your business:

Your own savings

The first source of finance you should consider for your business is your own savings, or money that you can raise from any surplus items that you can sell.

The second source you should consider is your family and friends, and their savings. Borrowing from family and friends can save you a considerable amount of money. The interest rates on small loans from banks can be high, and you will find this a considerable burden on your business through the first few months.

Savings and loans schemes are widely available. The schemes charge high interest rates, but there are no additional charges (unlike many banks and micro-finance schemes) and the interest goes back to the community. Much more on this can be found on the website www.kiva.org but in essence, the savings and loans schemes are set up by local communities of up to 35 people, who each bring their savings together, loan out to members of the scheme, and each share in the profits. The schemes elect their own officers, make their own bylaws and set their own loan terms.

It is hard to get a loan from a Commercial Bank, because usually they are not geared up to deal with the small loans that you are likely to be considering (or eligible for).

The primary alternative to family funding or savings and loan schemes are the Microfinance institutions. The administrative costs of microfinance are high compared to the value of most loans. These administrative costs are covered by the interest rates charged. Information on Microfinance organizations in your region can be found through www.microfinancecouncil.org.

Micro-Financing worldwide

Micro finance is a range of financial services for the poor and low-income clients, particularly micro-entrepreneurs. These financial services can include business loans, savings, and housing loans. You can use the loans to purchase supplies, merchandise, or equipment for your micro enterprise.

To qualify for a regular business loan, a micro-entrepreneur must join a fellowship group near his/her residence. During each meeting the community partners pay their loans, make savings deposits, share successes, and talk about each other’s business and/or personal problems.

An example: http://cct.org.ph/microfinance/