Did you know that Cambodia has been the fastest growing economy in the Southeast Asian region since 2017? In our current bustling economic environment, there are plenty of opportunities for young entrepreneurs to start profitable businesses.

If you’re one of the many aspiring young entrepreneurs, starting your business might not be as difficult as you think if you have the knowledge, the determination and, of course, the resources. In this article, we will discuss one of the key aspects of starting a new business, getting financing in.

Have a Business Plan

Everyone has had a million-dollar idea in his or her head. It’s up to you to find it and turn it into reality. Sounds easy, no? While all businesses start with an idea, not all ideas can turn into profitable business models. Dont’ forget that. First identify what you need to start your business. How? Create a business plan. A business plan is like a manual guide that will help you identify your business model, target market, competitors, pricing strategy and the best way to supply your product or service to future customers. If you’re interested to learn more about how to build one, we’ve written an article about it here.

How Much Start-up Money Will You Need?

The key to a successful business is preparation. It is crucial to know how much funds your business will need during the launch phase. Remember, most businesses will have expenses to pay even before opening their doors to customers. It will also take time for your business to break even or turn a profit. Use this handy guide to help you ‘Calculate your Business Start-up Costs’.

Ways to Get Financing

Armed with a solid business plan and an indication of the starting capital required, you are ready to raise capital. Depending on how much money you need and the nature of your new business, here are some options for you to consider.

Self-Financing

This is also known as bootstrapping. Self-financing allows you to leverage your own financial resources to support your business. Hence, if your business capital requirement is USD2,000 or less, your best bet would be to dig into your own savings or raise the money by selling some non-essential personal assets. Although this method will allow you to save on paying interest rates, keep in mind that you are also taking all the financial risk on your own. Be extra careful to not spend more than you can afford.

Friends and Family

If you have family members or friends that are willing to loan you some money, then you may enjoy paying them back with a low-interest rate (or sometimes none at all!) when borrowing from them. However, be sure to set up clear repayment terms, sign an agreement and, needless to say, pay them back.

Apply for a Bank Loan

If your business is brand new, you may apply for a personal loan from a financial institution. However, if your business is already running and you wish to grow or expand it, then you may qualify for special types of business growth loans or SME loans from your bank.

When applying for a bank loan, you will need to provide some form of collateral – such as a property title or a Store Ownership Certificate. Alternatively, you may be able to secure a loan by providing a co-signer or guarantor who agrees to be responsible if you default on your loan.

Seek Out Angel Investors or Venture Capital Firms

In recent years, you may have seen the rise of ‘Angel Investors’ in Cambodia. Angel investors are wealthy individuals who invest in start-up companies. Venture Capital (VC) firms, on the other hand are companies that specialise in investing and guiding start-ups. In both cases, you will most likely receive funds in exchange for equity, an ownership stake in your company and thus, a percentage of your profits.

An entertaining way to gain insights into the world of equity investment is by watching TV shows such as Shark Tank (US) or Dragons’ Den (UK). Use online research to discover local angel investment opportunities and learn about VC firms such as Ooctane, which have been investing in Cambodian start-ups since 2018.

Use Your Money Wisely

Once you’ve secured the financing for your business (congratulations!), the crucial next step is ensuring that you use the money resourcefully and in accordance with the business plan presented to your investors or bank. Also, be sure to make your loan repayments on time or you may end up paying extra in late charges and negatively affect your personal and business credit rating.

For more information on starting a business or applying for a loan, check out our related articles below. As always, we wish you all the best with your business and financial ventures.