How Sole Proprietors fund their business

HOW SOLE PROPRIETORS FUND THEIR BUSINESS
Introduction
Every businessman needs capital in order to start their business. This capital is important and there are several methods that businessmen use in raising money for their project.

SOURCES OF FUNDING

Family sources

One of the common methods for raising money to start a sole proprietor is to approach a family man. Some of the family members that are approached are uncles, aunties, spouses. The family system in Africa in general and Ghana, in particular, is very strong. Most of the proprietors use this source of funding as the first step and later add other sources.

Private money lenders

Another source of funding for the sole proprietor is to borrow money from money lenders. These money lenders abound in the various communities and are ready to lend money to anybody who is willing to accept the terms.

Facilities from banks

Another source of funding for the sole proprietor is to contract loans from commercial banks. With a good business proposal, it is possible to get a loan from the banks. Mostly, this is one of the best sources of funding for sole proprietors, especially, when the interest rate is good.

Hire purchase

Some sole proprietors just go to producers or distributors of goods and collect a quantity to go and sell. The payment for the goods or products is made after they have been sold. The profit from this activity when put together becomes their business capital. This system is called hire purchase and it is one of the sources of funding for sole proprietors.

Savings or profits from the business

After all the above methods are used and profits start to be generated, the sole proprietors now roll back all or some of the profits made into the business. One can, therefore, say that businessmen use savings or profits from their business enterprises as seed capital to start other businesses or inject them back into their business in the form of expansion. 

SAMPLE QUESTION
1. a. Who is a sole proprietor? 
    b. Highlight five sources of capital for the sole proprietor.

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